Asia’s LNG Market: The New Stream
When describing Asia’s current LNG market, Atsunori Takeuchi, Senior Vice President LNG Asia-Pacific Gas Resources Department at Tokyo Gas Co. Limited, says that it is “not tight, but oil-linked, and is regulated at a low-level.”
According to Takeuchi’s analysis, world LNG demand will reach 232 MT; with supply at 252 MT, surpassing demand by 2012. Asia constitutes approximately 150 MT of the 232 MT in LNG demand. As for Japan, the devastating tsunami was cited to have had a positive impact on its LNG demand. An increase of 3MT was observed, a result partially offset by companies’ energy saving efforts, a non-recovery of productions, and a recession drawn from 2008. The short-term annual effect is an approximate increase of nine to 12 MTPA.
To accommodate the potential surge in demand, the country is on the path of reinforcing its LNG infrastructure; the Kashima PL now under construction is set to operate in 2012, and the Hitachi LNG terminal is planned to be constructed and ready by 2015.
What also came up at the conference are the challenges of growth and market constraints, specifically the difference in pricing of LNG. LNG prices in Asia – indexed to the Japan Crude Cocktail (JCC) – are on the rise, as compared to U.S. LNG prices that follow the Henry Hub (HH).
At the conference, Takeuchi spoke about “The New Stream,” referring to LNG supply from Canada and the U.S. to Asia. In particular, he mentioned shale, tight sands, CBM to LNG supplies from the US Gulf through Panama to Asia.
Shale reserves are present in several countries in Asia-Pacific. Australia is reported to own 400 tcf of shale reserves and 350 tcf of CBM, while Indonesia has 700 tcf of shale and 450 tcf of CBM. The Indonesian government is looking to start shale production in 2015. China is said to possibly own an approximate 900 tcf of shale.
Shale’s recoverable reserves have expanded 5.5 times more with these new sources coming on-stream. Of these, 140 fields are found in Asia-Pacific with a total reserve of 120 tcf.
“Currently, the LNG flows to Asia originate from the Middle East, Australia, and Indonesia,” Takeuchi says. “But in the future, there will be new flows of shale and CBM from Canada, the U.S., and Australia.”
Takeuchi concluded by saying that the Asian premium, referring to the JCC-linked LNG prices, has to be dispelled to prevent a stagnant market, and added that Tokyo Gas “keeps on opening new doors” to investments and expansions.