IEEJ： October 2014

ｃ○ IEEJ 2014

Special Bulletin
A Japanese Perspective on the International Energy Landscape (193)

October 31, 2014

Gas Asia Summit
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn October 29-30, the third Gas Asia Summit took place in Singapore. It served as aregional event of the higher-positioned Gastech conference and as one of the international
conferences for the Singapore International Energy Week under the leadership of the Singapore
government.
The Asia Gas Summit dealt with various problems for the growing Asian natural gas/LNG
market. A large number of natural gas/LNG market participants from not only Asia but also the restof the world held active discussions in eight sessions after three keynote speeches. Session topics
were (1) energy mix and natural gas’s roles, (2) Asian natural gas/LNG trade, (3) potential growth in
Asian natural gas demand, (4) North American, Russian, African and other new gas supply sources,(5) projected natural gas import growth in China and India, (6) power generation market and naturalgas/LNG, (7) LNG market and innovation, and (8) Asian LNG hubs. At each session, panelists’presentations were followed by questions and answers.
In discussions on the above wide range of topics from various angles, there was aconsensus that Asian natural gas demand will continue robust growth. But participants put forward
various views, including conflicting opinions, providing me with an opportunity to reaffirm thatmany uncertainties exist about the future course of the Asian natural gas/LNG market. Opinions
conflicted with each other particularly over Asian LNG supply and demand forecasts. A dominantview for gas consuming and importing countries was that the gas supply-demand balance will ease
toward 2020 as supply grows due to expanding U.S. LNG exports, Australian LNG project launches
and new supply sources in Russia, Canada and Eastern Africa. A view reiterated for the supply side
was that the gas supply-demand balance will remain tight instead of easing due to possible faster gas
demand growth, potential gas supply project troubles, delayed project launches, supply cost growth,and growing difficulties in launching new supply projects in the absence of buyers’ commitment. Ina sense, gas producing and consuming countries remained apart over gas supply and demand.
Asia Gas Summit participants also presented various views about the future picture of theAsian LNG pricing mechanism and possible Asian gas/LNG trading hubs, indicating no specificdirection for their convergence. At a time when crude oil prices were plunging, participants were1

IEEJ： October 2014ｃ
○ IEEJ 2014

divided over what the most desirable pricing mechanism would be based on the viewpoints of pricelevels and reasonability of pricing. Since the conference took place in Singapore, many participants
indicated their great expectations on Singapore as a potential LNG trading hub. But some otherparticipants also pointed to various problems regarding insufficient trading liquidity, market
transparency and market liberalization. There may still be many challenges regarding the future
Asian LNG market.
Through discussions at the conference, I gained some new viewpoints. In the following, I
would like to describe the three most impressive points on different problems.
First, the Asian coal market’s structural changes over the past two decades may besignificant for anticipating the future Asian LNG market. The development of the Asian LNG market
had already been compared with that of the oil market and the European and U.S. gas market in thepast. At the Singapore conference, however, one participant presented a view that the coal market
had featured a dominant bilateral and rather inflexible pricing system for long-term contracts in the1990s and has turned around due to an increase in spot transactions and the growing importance of
spot prices for pricing determinations for long-term contracts amid supply/demand and marketstructure changes. Impressively, the participant indicated that how players should respond or adapt(innovatively) to structural and trendy market changes is important as these changes make it difficult
for those players to resist the existing forces to keep the status quo.
Second, participants indicated their strong interests in a comprehensive alliance between
Tokyo Electric Power Co. and Chubu Electric Power Co. as announced in early October, while
presenting various views about alliances within LNG consuming countries. This alliance willproduce the world’s largest LNG procurer with annual purchases reaching about 40 million tons.
Attention will thus be paid to what implications this alliance would have for the future Asian LNG
market, supply and demand, the impact the alliance would have and whether it could successfully
procure LNG at more competitive prices. Although major topics regarding Japan at this kind ofconference had been nuclear power plants’ restart, and related decline in LNG demand, and future
trends, the alliance might have become a new attention-attracting topic for market players.
Third, one participant pointed out that Russia could implement the Altai project forproviding China with natural gas via pipeline from Western Siberia in addition to pipeline gas supply
subjected to a Russia-China agreement in May amid the tense Ukraine situation and related Western
economic sanctions on Russia. And it was argued that Russian gas supply to China could exceed
100 billion cubic meters including the supply under the May agreement if supply via western route
could be expanded. Such expansion in pipeline gas supply to China could greatly affect future LNG
demand growth in China, exerting great impacts on the Asian LNG supply and demand environment.
We may have to closely watch future developments regarding Russian gas supply to China.

2

IEEJ： October 2014

ｃ○ IEEJ 2014

The three points, though not related to each other, were interesting takeaways from theSingapore conference for me. We must collect up-to-date information on the Asian LNG market andanalyze the market based on such information.

Contact: report@tky.ieej.or.jp
The back issues are available at the following URL
http://eneken.ieej.or.jp/en/special_bulletin.html

3