INTERVIEW: Australia, Asia May Have Edge In LNG Market
sg.biz.yahoo.com
Friday January 30, 2:57 PM
By Edgar Ang
Of DOW JONES NEWSWIRES
SINGAPORE (Dow Jones)--Australian and Asian liquefied natural gas producers may have a competitive edge over aggressive Middle East producers in capturing contracts in the enormous, and growing Chinese and US markets, according to a major regional producer.
Australasian suppliers face a tough battle among themselves to cash in on these markets, and also with producers such as Qatar LNG, which boasts huge gas reserve of 15 trillion cubic feet and has relatively low production costs.
But Australian and Asian producers may win coveted US and Chinese contracts due to transport cost advantages, and possibly for political reasons.
The major Australian LNG producer is North West Shelf Venture, while Asian producers are Indonesia's Pertamina, Malaysia's Petronas and Brunei LNG.
Despite their higher production costs, Australian and Asian producers hold the shipping advantage for the Asia-Pacific and US West coast markets, said John Banner, president of North West Shelf Australia LNG Pty Ltd, in a recent interview with Dow Jones Newswires.
NWSA LNG is the LNG marketing arm of North West Shelf Venture, an equal-share joint-venture group BHP Billiton Petroleum, BP Developments Australia, ChevronTexaco Australia, Japan Australia LNG, Shell Development Australia, Woodside Energy.
NWSA LNG now sells about 7.5 million tons per year of LNG to South Korea and Japan, and soon will be supplying China.
In 2003 it won a supply contract in southern China and is expected to supply at least 3.3 million metric tons of LNG to Guangdong province from 2006. About 60% of the import volume is for power generation.
But competition is fierce and a string of major supply contracts in China and the US are pending.
Last year, Qatar Liquefied Gas Company Ltd. (Qatargas) snagged the 25-year term supply contract with Taiwan's Chinese Petroleum Corp. for its new 4,272 Megawatt Tatan combined-cycle power plant.
NWSV is, nonetheless powering ahead with its expansion plans. Its new "No.4" 4.2 million tons/year capacity LNG production train is on schedule for mid-2004 completion, Banner said. The new train is expected to produce its first LNG cargo in the later part of this year.
NWSA may consider a fifth LNG production train if it secures more supply contracts, he said.
Geographical Advantage
Middle East suppliers have the shipping advantage for markets in Europe, the US Atlantic coast and the South Asia regions, he said.
But key supplier Qatar may not be in a position to penetrate the Chinese market due to political factors, some industry sources argue.
That's because its LNG sales to Taiwan may put it out of the running for supply contracts to mainland China.
Talking up NSVW's advantages, Banner pointed out that many LNG buyers prefer to buy their supplies from established plants rather than greenfield projects.
"Middle East (Iranian South Pars) and Asian Pacific projects (Indonesian Tangguh projects) are greenfield projects with no track record," he said, adding that NSWV recently delivered its 1,500th consecutive cargo to its term customer in Japan.
Greenfield projects are new projects which haven't come onstream.
Strong Demand Growth
China's first LNG terminal, in Guangdong, will be supplied by NWSV, while a second terminal in Fujian is expected to be supplied by the Tangguh project.
Another four supply contracts for terminals in Shanghai, Jiangsu, Zhejiang and Shandong are expected to be put up for grabs in the near term, pending government approval.
China seems to favor Australian LNG. Last October, China National Offshore and Oil Corp. announced plans to buy a 12.5% state in the western Australia Gorgon gas project and take some 100 million tons of Gorgon LNG over the next 25 years. The first gas from the Gorgon project is expected in 2008.
CNOOC had previously announced its intention to take a 25% stake in the North-West Shelf China project.
The US West coast and Mexico have proposals for about 10 LNG receiving terminals, and it is expected at least two to three projects will get off the ground, Banner said.
Indonesia is expected to supply 3 million tons/year of Tangguh LNG to US West Coast, but the US West coast has room for more LNG suppliers.
Gas output in China and the US are declining gradually and domestic demand is growing, raising the need for more gas imports in the future, Banner said.
This may change the current perception of a "buyer's market" among term LNG buyers.
Right now, "there's a limited number of LNG buyers, and the buyers are getting more sellers knocking at their doors," Banner said.
However, with China and US West coast expecting to commission import terminals in 2006-2007, demand in these markets should grow quickly, he said.
Indonesia is trying to secure gas buyers for the Tangguh project, and Malaysia is actively seeking buyers for much of the production from its new 3.4 million ton/year production train 8 at MLNG Tiga.
Banner cautioned that LNG spot demand can increase suddenly during emergencies, such as Japan's nuclear power shortage problem last year, or cold spells in North Asia.
"There were fewer spot cargoes in the Asian market last year because many surplus cargoes went to Japan and South Korea...Some spot cargoes were even sourced from West Africa," Banner said.
Partly due to the continuous high North Asian demand, NWSV production is expected to be fully committed for this year.
"We're sold out for this year, but we could still possibly squeeze out one extra spot cargo," Banner said.
Taiwan's CPC, which currently buys term LNG from Malaysia and Indonesia, couldn't secure any Asian spot cargoes last year when it was forced into the market by a shortage of coal supplies.
Copyright © 2002 Dow Jones & Company Inc. All rights reserved. |
