Asia to Drive Global LNG Demand Growth in 2013-2019

By: Cheang Chee Yew

Whenever the subject of economic opportunities is raised, Asia will inevitably be the buzzword. And so it was at a recent conference on liquefied natural gas (LNG) in Singapore, where there were discussions on how to meet the rising gas demand for the region.

Global natural gas consumption is projected to increase 20 percent from 2013 to 2019, with the gains driven primarily by China, while demand growth in Europe is expected to stay below 2010 levels, Jerome Ferrier, president of International Gas Union told delegates at the 6th World LNG Series: Asia Pacific Summit.

Europe – including European Union (EU) members plus Norway, Switzerland, Turkey and non-EU Balkan states – consumed 20.52 trillion cubic feet in 2010, according to the U.S. Energy Information Administration.

While China is expected to drive Asia’s gas demand growth as it shift towards greater use of a cleaner fuel due to environmental consideration, the region, which overtook Europe in natural gas consumption in 2010, is home to several large LNG importers, including Japan – the world’s largest LNG importer – and South Korea.

Considerable time was spent at the conference on how the growing Asian gas demand would be met, particularly with exports from North America. A representative from Cheniere Energy discussed the impact of U.S. LNG exports on global gas market liquidity, while speakers from Mozambique’s Empresa Nacional de Hidrocarbonetos E.P. (ENH) and Anadarko Petroleum Corp. provided an update on LNG projects in the East African country.

There was, as expected, little mention of Australia as an LNG investment destination despite several current developments, as the country is still grappling with huge cost overruns for some projects such as Gorgon, where cost has shot up by an estimated 46 percent from $37 billion to $54 billion.

Although large scale gas projects attracted more attention from delegates, the conference did set aside time for a discussion on small and mid-scale LNG projects. Indonesia, with its many small but geographically scattered gas fields was cited as an example where small and mid-scale LNG projects could be economically viable to develop.

“Gas demand in scattered locations drives small scale LNG projects in Indonesia,” Didik Sasanko Widi, PT Pertamina’s vice president for LNG said.

The means extracting gas from small to mid-scale LNG projects was also discussed, with Exelerate Energy’s Senior Director for Floating Liquefaction Frederik Smits van Oyen highlighting the firm’s floating LNG midstream solutions. Industry interests in the use of FLNG as a field development option has gained momentum in recent years, after Royal Dutch Shell plc launched its Prelude project offshore Western Australia.

With all the talk about China being a major growth driver for global LNG demand, it was perhaps surprising that no one representing a major Chinese oil and gas firm spoke at the conference. Had such a speaker been present, conference participants could have gained a first-hand account of how Beijing views current developments in the LNG industry, especially after China and Russia signed a $400 billion gas supply deal in May.

Meanwhile, a Japanese Ministry of Economy, Trade and Industry official mooted the idea of establishing an Asian hub for LNG spot markets and futures market in Japan, home of the world’s largest LNG importer. The desire to become an Asian LNG hub is not new, with Singapore having already signaled its intention to create one earlier.

“We are currently working with several stakeholders, including the Singapore Stock Exchange, IE Singapore (a trade promotion organization), and regional governments and commodity exchanges, to realize this Asian LNG Hub concept,” Seah Moon Ming, Group CEO of Pavilion Energy Pte Ltd. told conference participants.

Singapore, an established Asian oil trading center located strategically in the Strait of Malacca and the South China Sea where over half of the world’s LNG supplies passes through, is working towards building a regional LNG hub. To support this goal, Singapore is adding geographical diversification for its LNG infrastructure, Seah added, with the government planning to build a second LNG terminal in the country. The island-state is also expanding capacity at the existing Singapore LNG Terminal by adding a fourth storage tank, bringing throughput capacity to 9 million tons per annum.

With so much to do, the LNG industry in Asia faces interesting times ahead even though new developments could change the industry landscape. What appears certain is that more LNG will be needed to meet the energy supply deficit in the region.

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