IEEJ: October 2012 All Right Reserved
Special Bulletin
A Japanese Perspective on the International Energy Landscape (105)

October 5, 2012

Participating in IEA-IEF-OPEC International Symposium
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn October 4, the International Energy Agency, the International Energy Forum and theOrganization of Petroleum Exporting Countries cosponsored an international symposium on thenatural gas and coal market outlook and challenges at the IEA head office in Paris. It was the firsttime for the three representative organizations regarding global energy problems to hold asymposium on this paticular topic. More than 60 government officials, industry people and experts
participated in the symposium where discussions took place in three sessions on “Recent natural gas
market developments and outlook,” “Recent coal market developments and outlook” and “Financial
regulation in gas and coal markets.” I here would like to summarize key points that impressed me
through discussions at the symposium.
First, I felt it was timely and significant that the symposium took up natural gas and coalsimultaneously and discussed market developments, future outlooks and challenges. It may beneedless to say that natural gas and coal are important energy sources. Over recent years, particularly,
we have seen such remarkable developments as the shale gas revolution for natural gas and a rapid
increase in coal demand in Asia including China. The symposium provided an opportunity to discussproblems involving the two competing energy sources from a wide range of perspectives including
their mutual and competitive relationship.
Second, I felt anew that the world energy market has made a major change regarding theabovementioned mutual relationship between gas and coal. The key word for the change is the U.S.
shale gas revolution. As is well known, the shale gas revolution has exerted wide-ranging greateffects on U.S. natural gas demand, gas prices and gas businesses. The revolution has had spillover
effects on other areas than the natural gas market. It has exerted great effects on coal subjected todiscussion at the symposium. Great impacts have been seen not only on the U.S. coal market but also
on the international coal market. Specifically, rapid gas price declines have enhanced the pricecompetitiveness of natural gas, prompting natural gas to replace coal which is the dominant fuel for
the U.S. power generation market. The replacement has worked to rapidly reduce coal demand,
making it difficult to secure sales outlets for coal in the U.S. market and resulting in a coal glut.
Moves have emerged to secure coal sales outlets in the international market. Coal exports from theUnited States have massively flowed into China that has replaced Japan as the world’s largest coalimporter. This is a major development regarding global coal trade. Under the circumstances, coalprices have declined globally. This phenomenon is a typical example of the U.S. shale gas
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revolution’s spillover effects on the entire world beyond the natural gas market.
Third, participants in the symposium frequently pointed out that energy market changes
under the influence of the shale gas revolution have not been uniform but different from region toregion. This was impressive to me. In this respect, particularly, the European situation and future
developments will attract attention. Although various arguments were given on the IEA report about
a golden age for natural gas at the symposium, the words “golden age” may not be suitable forEurope. The European situation was recognized at the symposium as tough for gas market players
including gas producing countries and gas business operators. Since the shale gas revolution, theUnited States has benefited from the growing use of lower-priced gas, Asia has expanded gas
demand in accordance with economic growth, and Japan has had special demand for liquefied
natural gas following the March 2011 Great East Japan Earthquake. In contrast, Europe has seen aslowdown or decline in natural gas demand since 2011. Instead, it has seen a rise in demand for coalthat has enhanced its relative price competiveness. In Europe, demand is shifting from gas to coal incontrast to the U.S. trend. This situation was pointed out by many participants in the symposium.
Although the growing coal consumption is expected to expand carbon dioxide emissions and cause
problems and fears for Europe that is committed to positive policies against global warming, the low
coal and carbon prices and the stagnant European economic and energy situation are behind theenergy selection in the market.
Fourth, I would like to point out that symposium participants stated anew that China’smoves will be very important as a factor that will greatly influence future international natural gas
and coal market trends. China has more unconventional gas resources than the United States and agiant coal market accounting for nearly half of the global market. Such country’s domestic gas andmarket development trends and gas imports are decisively important for future market trends. Chinahas become a net importer of coal, as well as oil and natural gas, and has rapidly expanded coal
imports to replace Japan as the world’s largest coal importer. Future coal consumption and importdevelopments in China will hold the key to global coal supply and demand, coal prices and carbon
dioxide emissions.
Fifth, symposium participants impressively pointed to many uncertain factors for futurenatural gas and coal markets. Regarding the abovementioned China factor, future economic growthand energy policy developments are uncertain. Symposium participants noted there are variousuncertain factors regarding how far unconventional gas resources could be developed outside theUnited States and how long the present U.S. gas supply/demand and price trends could be sustained.
Uncertainties about the position of nuclear power generation after the Fukushima accident were also
cited as a key factor. Some participants pointed to future uncertainties emerging from technologicaldevelopment in the energy production, transportation and utilization phases. I felt anew that we musttake into account a large number of factors and uncertainties when anticipating future energymarkets.
The IEA, IEF and OPEC had earlier sponsored international symposiums on oil market
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outlooks and oil pricing problems. The latest symposium was significant in that the scope ofdiscussions was expanded to cover natural gas and coal. In order to address energy problems plagued
with uncertainties and many challenges, stakeholders should share awareness of the problems
through frank discussions and improve and deepen their understanding and recognition of energy
markets through efforts to share information and make market information transparent. The latest
symposium might have become a new platform for promoting discussions between stakeholders anddeepening their understanding of markets.
Contact: report@tky.ieej.or.jp
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