Japan "facing LNG cost challenge"
With the Fukushima debacle setting back Japan's nuclear energy generation, LNG remains its only option for now, with challenges in store...
The boom in Asia's spot Liquefied Natural Gas (LNG) is set to continue--based on Japan's increased LNG reliance and the needs of other growing and maturing Asian markets--said Jim Nicholson, Vice President, Argus Asia.
Nicholson believes that post-Fukushima, Japan will rely on thermal generation for years before nuclear generation return to its previous levels. He said a return to nuclear generation would require the introduction of new safety standards and that new stress test regulations would likely require major construction. With coal unfeasible because of Japan's global CO2 emissions obligations, he said LNG appeared to be the country's only option.
Nicholson, however, highlighted a new challenge for Japan--higher costs. He said one factor was the freight costs for LNG coming from Qatar and Africa. Seasonal demand and oil-linked LNG formulas have further increased Japan's LNG costs.
Nicholson said Asia's LNG needs will account for over 70 percent of world demand by 2015, with China and India expected to be the key consumers. The region's LNG requirements will increase from 175 million tonnes in 2012 to 307 million tonnes in 2020.
He concluded that growing LNG markets will boost spot trade and that the market will continue to evolve, leaving room for the growth of an Asian price index. He said more volumes are coming onstream and buyers are keeping their options open with shorter-term contracts. Emerging buyers in China, India and Southeast Asia are also expected to contribute to the vitality of the market.
By :Tay Kai Soon, EMA