21 - New Horizons for Liquefied Natural Gas (LNG) East of Suez

Summary

There are several recent developments and emerging issues in liquefied natural gas (LNG) markets that are likely to shape Asia-Pacific LNG trade in the coming years. Prospects for ongoing strong growth in LNG imports in many existing and new markets have firmed, as have prospects for some regional LNG export projects.

While there is ample regional LNG export potential in the longer term, few projects dedicated to Asia-Pacific LNG trade are due on line before the end of the decade. As a result, the LNG market in the Asia Pacific appears increasingly tight in the short term, especially to meet seasonal demand peaks. Construction of LNG export projects continues to be delayed until some long-term sales contracts are confirmed.

The scale of the expected LNG trade expansion requires large volumes of capital and labour with particular skills, raising further concerns about the timing and cost of export projects, including those in Australia. Other key issues shaping the market include current high LNG prices linked to oil prices, buyer demands for more flexible contracts, and the continuing globalization of the market.

The objective in this chapter is to review recent developments and emerging issues in LNG markets and to analyse their implications for LNG trade in the Asia-Pacific region. The chapter provides a brief update of ABARE's major study on the Asia-Pacific LNG market, released in November 2004 (Ball et al. 2004).

ASIA-PACIFIC LNG TRADE IN 2004

Strong Growth in Imports

In 2004, LNG imports in the Asia Pacific grew by 6.0 per cent to an estimated 88 million tonnes, up from 83 million tonnes in 2003. Globally, LNG trade in 2004 rose by 5.4 per cent, from 123 million tonnes to 132 million tonnes.

In the Republic of Korea, LNG imports increased by 15 per cent to 22.1 million tonnes in 2004, reflecting continued gas market growth and problems at some nuclear power plants.