By Michael J. Economides
LNG in Asia-Pacific
Within the Asia Pacific region, growth in LNG demand is strong and expected to stay that way, rising from the almost 150 million tons traded globally today to more than 300 million tons by 2015.
This demand is driven by the following:
- The struggle to grow North American gas reserves and production – for the past few years, unconventional gas (CBM, silt/shale, coal) has been the only source of U.S. production growth.- Rapid growth in regasification terminal capacity in the U.S. and Mexico.- Barriers to the development and delivery of Alaskan gas to the lower 48 states.- The almost complete lack of indigenous gas resources in northeast Asia.- New and emerging markets with massive growth potential in China and India, and smaller markets in Thailand, Singapore, and the Philippines.- Industrialization in China that is creating an urgent need for power. China has eight of the 10 worst-polluted cities on earth, which means that there are immediate health reasons for cleanly-generated power. Also, that urbanization is producing a growing need for peaking power.- The environmental premium attached to more emissions-intensive fuels such as coal. - The development of Canadian tar-sands projects, and Canada’s declining gas export capacity. - Success in markets outside the region, such as in the U.K. Over the space of a few years, the country has developed the infrastructure and supply necessary to turn it from a gas exporter into a net importer, with gas available from a number of pipeline and LNG import options.- The growth, liberalization, and gradual commoditization of a global LNG market in which the U.S. and European markets will set prices. Qatar will be a swing supplier, and arbitrage opportunities will favor large portfolio players with widespread sources of supply and captive shipping.
Pipeline gas demand will mirror LNG demand growth, but is more constrained by cross-border pricing and ownership issues. Prospective pipeline projects to deliver gas from West and East Siberia, Sakhalin, Kazakhstan, and Turkmenistan into northeast Asia, and via the Trans-Asian system into southeast Asia, have been discussed for more than a decade, but are hampered by infrastructure costs, competition between importing countries, and (at least in the case of northeast Asia) an absence of viable commercial frameworks and pricing mechanisms.
Other key concerns of Asia Pacific Economic Cooperation officials are capacity expansion, education, and knowledge sharing, all of which are also prominent on the APGAS agenda. One need look no further than Malibu Beach in California, and the current uninformed fuss being created there over potential imports of LNG into that energy-hungry state, to see the need for informed and educated debate of real issues, rather than the frivolous, loud, graceless, and ignorant public evangelism about imagined threats to real estate values, designed to generate fear at the expense of rational discourse about sustainable access to clean and secure energy.