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Special Bulletin
A Japanese Perspective on the International Energy Landscape (134)

June 12, 2013

Prospects for the Future Asian Oil/Gas Market: AOGC 2013
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, Japan
The Asia Oil and Gas Conference 2013 took place in the Malaysian capital of Kuala
Lumpur on June 9-11. This was the 17th annual AOGC meeting since the first one was held in 1996.
As indicated by the name, the international conference deals with various problems regarding theAsian oil and gas market. Malaysian state-run oil company Petronas sponsored the conference andannounced that as many as 1,200 people from 30 countries participated in the meeting. MalaysianPrime Minister Najib Razak made a keynote address at the opening ceremony, leading us to feel that
Malaysia gave priority to the conference.
AOGC 2013 participants made presentations and held discussions on Asian oil and gas
problems including present oil and gas industry conditions, future economic and political scenarios,
Asian energy security, the U.S. shale revolution and its impacts on Asia, and the present situation ofand future prospects for upstream, midstream and downstream oil and gas markets. I would like tosummarize impressive points of the discussions on Asian oil and gas problems at the conference.
First, AOGC participants based their arguments on a common recognition that the Asianoil and gas market will grow even more important as Asia expands its oil and gas demand andimports and its dependence on such imports. They were also conscious that the Asian market isimportant for Malaysia that is a major oil and gas producer and a major LNG exporter in Asia.
Another impressive point was that various challenges inside and outside the Asian market and theproblem of uncertainties over the market, as well as the recognition of Asia’s importance, are major
matters of concern to Malaysia and other stakeholders in the market.
At an Asian energy security session in which I participated, participants indicated theirconcern over Japan’s future energy and environment policies in regard to energy problems in Asia
that is increasing its dependence on energy imports. They also made arguments on destabilizing
factors and problems in the Middle East that is deepening interdependent relations with Asia.
Discussions at the session focused on Iran and Iraq. Interesting arguments were made on the Iranianpresidential election and its geopolitical impact on Iran and the Persian Gulf region, challenges
involving Iraq’s future stabilization and development, and the relationship between the Kurdish
region and the Iraqi central government and its impacts on future oil development. Participants also
pointed out that how to respond to a rapid increase in energy demand in the Middle East would1

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become a very important challenge, prodding the region to enhance interdependent relations withAsia.
Second, participants indicated their great interests in the trends and impacts of the U.S.
shale revolution as a factor that would influence interdependent relations between Asia and theMiddle East. The second session of the conference focused on this point. Even at other sessions,many presentations and arguments were made on the shale revolution, indicating that the U.S. shale
revolution has been positioned as the biggest factor for considering the future Asian oil and gas
market. Some speakers attracted attention by pointing out that the United States could become one of
the world’s leading LNG exporters by around 2020 and that shale oil production could increase more
substantially than expected traditionally. These arguments indicated that Malaysia and other present
oil and gas exporters to the Asian market have had no choice but to grow more conscious of great
influences or impacts from the U.S. shale revolution.
Third, AOGC participants indicated their great concerns over the future course of theAsian LNG market including impacts of attention-attracting U.S. LNG exports and Mozambique’s
LNG project that could make the African country one of the world’s leading LNG exporters over along period after 2020. The conference featured checks and cautions against exaggerating or placing
excessive expectations on impacts of U.S. LNG exports while representatives from gas producing
countries and supply-side players were dominant among speakers and panelists. Participants also
made skeptical and other interesting arguments about whether a buyer’s market could emerge in theAsian LNG market as expected by buyers and whether cheap LNG could really exist. I felt that thesequestions have become major challenges or matters of concern for the suppliers’ side. At the sametime, I recognized that we would have to sufficiently consider not only security of supply for buyers
but also security of demand for sellers.
Fourth, many participants pointed out that a sustained expansion in tight and otherunconventional oil output is exerting pressures on the macro supply-demand balance in theinternational oil market to ease. This is an oil market problem that is also of great significance togas/LNG problems. Over a medium term, downward pressures on crude oil prices could emerge andtrigger changes in the oil situation. Any crude oil price fall is expected to exert great influences on
the problem of pricing in the Asian LNG market and on new LNG projects. In this sense, we may
have to keep close watch on future oil market developments including impacts of the shale
revolution. There are many other factors we cannot ignore in anticipating the future course of Asia,
including changes in heavy and light crude oil flows, the conditions of the U.S. oil refining industryand petroleum product export and their impacts on Asia, and U.S. petrochemical industry conditions
and their influences on the Asian market. Regarding the future course of the Asian oil and gas market
that will grow more important for the international market, we may have to pay attention and give
sufficient considerations to positions, views and strategies of not only new market players but also
Asian oil and gas producing countries and other existing players who play key roles in the presentmarket.
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