Asia faces US buying power for spot LNG
Published: Saturday, 9 September, 2006, 11:55 AM Doha Time
gulf-times.com
China and India are among nations with surging gas demand, but sellers may hold out for those with greater buying power such as Japan and the US
SINGAPORE: Asia may lose out on costly spot and term LNG supplies next decade as it faces competition from increased Western import capacity, leaving a question mark over planned reliance on gas, a conference heard this week.
China and India are among nations with surging gas demand that are trying to secure deals to import gas by tanker or pipeline, but sellers may hold out for those with greater buying power such as Japan and the US.
“The Far East will have to compete with high prices in the US market,” said Mohammed Hadi Nejad-Hosseinian, Iran’s deputy oil minister. “The new price benchmark in the Far East market will be set by competition between Western and Eastern markets.”
The world’s top energy consumer the US is expected to become the second largest liquefied natural gas (LNG) importer after Japan by 2010 and overtake Japan after 2015, according to consultancy FACTS Global Energy.
Iran, with the world’s second largest gas reserves, is looking to finalise deals to supply Pakistan and India by pipeline within two months or it will consider increasing the volume committed to LNG projects. But Nejad-Hosseinian pointed to unrealistic Asian expectations that gas should be cheap.
“If Asian countries want to buy gas they should realise Asian supplies are not enough for Asia – Middle Eastern supplies should be allocated to both West and East,” Nejad-Hosseinian told the conference in Singapore.
Pakistan’s Sui Southern Gas Co Ltd told Reuters it Islamabad is struggling to secure LNG contracts from either Middle East exporters or energy majors before 2012, leaving a potential shortfall for an import terminal planned for 2010.
Supplies from top exporter Indonesia are declining while its domestic demand is growing, leaving a question mark over the renewal of contracts after 2010 to Japanese buyers and so a scramble for alternative supplies.
“Japan has bought most of the LNG in Asia, leaving competition in China, India and South Korea behind, changing the LNG landscape,” said Fereidun Fesharaki, CEO of FACTS.
“China and India are still not addicted to gas - they will find coal the best buy.”
The development of an emerging spot market will increase flexibility to buyers but may be of little comfort to Asia in an open market. South Korean and Japanese buyers had to scramble for costly spot cargoes during supply disruptions last winter.
Darcel Hulse, president of Sempra Energy’s LNG business, told the conference the US sees a 25bn cu ft swing in US gas demand between August and January.
This will lead to a spike in US winter spot LNG demand, with spare tankage likely as the US plans a multitude of import terminals.
“If you can send a cargo to the US then anyone else will have to pay a premium,” said Cecile Jovene, senior consultant at FACTS. “Regasification capacity (in the West) is not a problem,” she said at the Conference Connection event.
Oil prices often rally in winter when New York heating oil futures spike to attract fuel shipments from both east and west. To compete on gas Asian governments need to remove subsidies so consumers can get used to world prices, delegates said.
“In the future it will be totally market driven,” said A.K. Ray, executive director of business development at India’s GAIL. “As far as India is concerned there is a lot changing in the mindset of consumers to pay the higher prices – they have no option,” he told Reuters. – Reuters |
