Oxfordenergy

The LNG Industry has long regarded the Asian markets of Japan, South Korea, Taiwan, China and India as high growth importing markets, willing to sign long term contracts with price terms linked to crude oil prices.  The rebound in Asian LNG demand in 2010, following the post-financial crisis year of 2009, re-affirmed this paradigm with LNG markets further tightening following the Fukushima tragedy. The signal for new LNG supply projects could not have been clearer in 2010 and 2011.

While the LNG supply projects triggered by such high demand growth and price signals were being constructed however, Asian demand for LNG began to wane.  This appeared to be partly a consequence of mild winters but also LNG import prices and a general regional economic slowdown, perhaps led by China, also contributed.  This paper seeks to provide a ‘ground level’ understanding of the existing, emerging and potential Asian LNG markets and highlights data sources from in-country government departments, often overlooked from a European or North American perspective.

The picture presented in this paper is one of LNG having to shed its mantle of a premium fuel whose import price is linked to that of oil and ‘re-market’ itself as fuel which can contribute to a lower carbon future, by displacing coal in national energy mixes, and equally importantly reducing particulate emissions. This however calls for a radical renaissance in marketing by upstream LNG producers and strenuous efforts in cost reduction through competition in the liquefaction equipment sector.

The paper provides a framework for analysing and monitoring these markets which, if not currently deemed to offer the high levels of future LNG demand anticipated from the standpoint of the early 2010s, will nevertheless constitute a key element of the global LNG balance for the foreseeable future. As such they will significantly impact the fundamentals and pricing dynamics of the increasingly ‘connected’ global regional gas markets.

Executive Summary