Meeting Asia's future gas demand

Asia is one of the largest buyers of LNG, predominantly due to its LNG power stations. As the region grows, this trend is expected to continue. One of the key issues faced by gas buyers in Asia is the high price relative to other regions.

"While this creates arbitrage opportunities and cross trades across the world, it also creates imbalances in the system, especially with respect to which form of energy to use. This, in turn, will impact demand for gas versus other energy sources such as coal," said Rajeev Mathur, Executive Director – Marketing, GAIL (India) Ltd.

Said Conrad Kerr, Vice President LNG, InterOil/Pacific LNG: "LNG demand in Asia is on the back of bankable LNG power plants that have point-to-point contracts. There is no gas-to-gas competition in Asia. If shale gas supplies become more prolific and reach Asia, then there could be a reason to look at a different index," observed Conrad Kerr. However, "this will not fundamentally change the nature of the demand for gas in the region. It will be fundamentally based on bankable LNG projects", he continued.

The Trans-ASEAN Gas Pipeline project aspires to address the issue of gas security and supply for the ASEAN region. "Through bilateral contracts, we can now have 3,020km of gas pipes in the region, from Myanmar to Thailand, Thailand to Malaysia, Malaysia to Singapore," said Victorino S Bala, MNSA ASCOPE Secretary-In-Charge (ASIC).

However, as traditional LNG exporters such Malaysia and Indonesia begin to turn to importing LNG, the question is now this: Which sources can buyers bank on as dependable over the next five to 10 years"Traditional players that have under-utilised capacity will continue to export. However, there will be new players on the market such as Western Canada with an abundance of shale oil and from where logistics are not an issue. Also increasingly important is the major gas discovery in Mozambique. However, this will take over 10 years to fully exploit," noted Kerr.

By :Neha Shah, INSEAD