Asia’s growing share in global LNG market
ASIA’S natural gas market is the fastest-growing in the world and is projected to become the second-largest gas market by 2015 - after the United States - with a gas demand of 790 bcm annually, writes Dr Frank Umbach.
Its regional share of global demand for natural gas increased from 13 per cent to 19 per cent during the last decade. Regional gas consumption may even nearly double, widening the gap between regional demand and supply, and resulting in a continued rise of Liquefied Natural Gas (LNG) and pipeline-gas imports.
Australia, Brunei, Indonesia, Malaysia and Myanmar are important gas exporters while Japan, China, South Korea, India, Taiwan, Singapore and Thailand have become increasingly dependent on ever-increasing imports of LNG.
Japan was already the world’s largest LNG importer before the Fukushima nuclear catastrophe in March 2011. Its LNG demand increased from 65 mt in 2009 to 87 mt in 2012 following the Fukushima accident and the decision to shut down its 50 nuclear reactors.
Asia’s share of global LNG trading has increased from 64 per cent in 2011 to 71 per cent in 2012 and 75 per cent in 2013. .
The US will remain the largest single gas consuming country in the world with a gas demand 50 per cent higher than China’s in 2035.
China became a LNG importer in 2006 and was originally dependent on Australian LNG for more than 80 per cent of its imports. Australia remains China’s largest source for LNG. China has also expanded its pipeline gas imports from Turkmenistan and Myanmar in contrast to other major LNG importers in Asia.
Natural gas demand has grown rapidly in South Korea after the state-controlled Korean Gas Corporation (KOGAS) was created in 1982 to diversify its national energy mix away from coal and oil. KOGAS is the world’s biggest single LNG importing company.
Qatar and Indonesia have been the biggest LNG suppliers to South Korea since 2002, but rising LNG imports from Russia and Yemen improved its LNG import portfolio in 2012.
Russia, facing a stagnating or even decreasing gas demand in Europe, is looking to increase its gas exports to the Asia-Pacific.
Taiwan, Asia’s sixth largest LNG importer, has signed a contract for US LNG-imports of 800,000 tons of shale gas per year, beginning in 2017.
Asia’s state-owned energy companies, like KOGAS, and Japanese energy companies have responded to the lack of their own domestic unconventional gas resources by increasing investment in US shale and by promoting US LNG exports to Asia.
China is also interested in importing US LNG from 2016. Japan, South Korea and Taiwan have already signed contracts to buy US-LNG.
Australia is Japan’s largest LNG supplier, ahead of Qatar. Australia’s gas production growth will see exports expand and they may even surpass those of Qatar making it the world’s largest LNG exporter by around 2018-2020.
Thailand started to import LNG in 2012, followed by Singapore in 2013. The number of LNG importing countries has increased by more than half since 2008. The Philippines and Vietnam are projected to start importing LNG within the next decade.
Total Asia-Pacific LNG imports from other regions are projected to rise by 62 per cent by 2017 compared with 2011. Around 72 per cent of all global LNG supplies on spot market prices were bought by Asian importers in 2012 - with Japan, South Korea and India alone accounting for 61 per cent.
Singapore opened Asia’s first open-access export and import LNG terminal in 2013. By signing 15 contracts with 11 different customers, the government hopes it will contribute to the development of Singapore as a regional gas hub. A sustainable trading gas hub in Asia will depend on the existence of a large network of LNG receiving-terminals creating multiple and diverse trading points throughout the region.
The region also lacks a real transnational pipeline network within Asia.
The strategy to establish regional trading hubs is intended to de-link regional gas prices from the oil-indexed formation and long-term contracts and the region’s historical link to the average price of Japanese oil imports, nicknamed ‘Japanese crude cocktail’.
Asian energy companies have recently developed a vision of an interconnected Asian gas market with new pipeline infrastructure from Russia’s Far East, a China-Taiwan pipeline and LNG hubs in Singapore, China, South Korea and Japan.
But a competitive natural gas market in Asia depends on a much more flexible LNG supply with further expansion in shipping, new pipeline networks, a granted third-party access to regasification terminals and effective independent regulatory authorities in the Asia-Pacific region.