The Asia-Pacific market for natural gas, and in particular, liquefied natural gas (LNG), is likely to stay robust for the long-term, two Singapore-based energy attorneys said last week. A shift also is seen in moving from conventional to more unconventional gas resources.
The near-term may see a decrease in gas demand throughout the region, which is indicative of slowing, albeit still growing, economies.
The Asia-Pacific region also is developing more gas pipelines, but they won’t lessen the need for LNG, said Dan Rogers and Merrick White, partners at King & Spalding LLP (K&S). They spoke during an Infocast webinar, “The Evolving Asian-Pacific Gas Market.”
“All of the Asian nations currently are projecting lower than expected growth in gas demand relative to last year and the year before that,” Rogers said. “But that growth is stronger than North America or Europe and some of the other markets. There is a downturn projected, but we see demand over the long term remaining very strong.”
One of the major changes in the Asian gas market is the “switchover to unconventional (shale gas and coalbed methane) from conventional supplies,” he said.
“Increasingly, the unconventional projects are more prevalent, where prior to eight years ago you probably wouldn’t have seen any unconventional gas-to-LNG projects — even on the drawing board,” he said. “Now you see a number moving forward and others that are in the development process.”
The “politics” involved in the unconventional projects can be “quite complex and create new twists.”
With more than a dozen export projects proposed in North America, “there is an awful lot of anticipation in the Asian-Pacific market about LNG supplies from North America, in particular because of the relative low Henry Hub-based gas prices,” said Rogers. He added that there also is a lot of opposition in the United States to LNG exports. This year should bring more clarity.
Current long-range projections show every Asian nation increasing its demand for LNG during the next 20 years, particularly between 2024 and 2032, according to projections from other Asian-Pacific sources, said the attorneys.
However, the bullish picture for gas in Asia is not without hurdles — economic, technical, political and physical. “Our view is that even if the Asian-Pacific gas pipeline grid is eventually set up as now advertised, it won’t result in the creation of an inter-Asian pipeline grid.”
For U.S. Gulf of Mexico export projects, the Panama Canal expansion project to accommodate the larger tankers should help with exports. In 2014 the canal should be able to accept most LNG tankers, Rogers said.
Other issues also need to be addressed in transporting through the Panama Canal regarding the physical aspects of unconventional gas sources, long-term Asia demand forecasts, gas pricing and contract reviews, and the influx of more spot pricing.
“Fees for LNG tankers in the Panama Canal are not going to be nominal, and they are something that will have to be seriously taken into consideration,” said Rogers. He said one global LNG transit expert has estimated the fees could be more than $1 million/shipment.
For unconventional supplies-to-LNG projects, the lawyers said there is well-funded and organized opposition to LNG exports that relate to concerns about unconventional drilling (see related story). The groups have challenged projects across the globe.
White identified potential challenges in indigenous conventional supplies that are not being readily replaced in nations such as Indonesia and where unconventional supplies have great potential but face tougher regulatory and economic hurdles. They also mentioned the availability of cheap coal from places such as the United States going to China as having a dampening impact on Asia-Pacific gas demand.
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