IEEJ：December 2019 ｃ○IEEJ 2019
Special Bulletin
A Japanese Perspective on the International Energy Landscape (456)November 29, 2019

Singapore Talks on Asia Pacific Gas/LNG Market Challenges
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn November 28, a conference took place in Singapore under the title “Natural Gas andLNG Market Dynamics in Asia and the Pacific Region.” As indicated by the title, the conference
focused on the Asia Pacific natural gas and LNG market’s future dynamic growth and changes, and it
was cosponsored by the Global Gas Center of the World Energy Council, the Energy Studies Instituteof the National University of Singapore, the Australia-China Relations Institute of the University ofTechnology Sydney and the International Energy Forum.
Some 60 participants in the conference included LNG industry representatives, scholars andexperts mainly from Asian countries, conducting vigorous talks in four sessions on the demand side,
the supply side, market dynamics, competition/energy transition/energy policy. In a keynote address
at the outset of the conference, I made a presentation to give an overview on hopes and challenges ofAsian natural gas and LNG market growth, based on the IEEJ Outlook 2020. In the following, I would
like to summarize impressive points of discussions at the conference.
It has been globally recognized that the center of global energy demand is shifting to Asia
that is driving global energy demand growth. As for gas and LNG, stakeholders have agreed that theAsian market will grow more important. In fact, Asian gas and LNG demand has substantially grown
and is well expected to continue expansion. At issue in this regard are the speed and degree of thegrowth. This is because the speed and degree are set to exert great influence on structural changes ingas and LNG supply and demand and in the gas and LNG market. In the conference, various views
were presented on slack spot LNG prices in Asia, factors behind the slackness, future developments
and their impacts. However, the key factor behind the slack prices is that demand expansion has beenslower than supply expansion, resulting in a loose supply-demand balance.
As noted above, few people doubt that Asian gas and LNG demand is going in the directionof expansion. However, there are numerous factors that exert influence on the speed and degree of theexpansion. In the keynote address, I pointed out that factors exerting such influence would include theeconomic growth speed, the intensity of environmental regulations, price affordability, andcompetition from coal, nuclear, renewable energy, and LPG and other petroleum products, as well asmarket liberalization and deregulation and competition between pipeline gas and LNG. Based on aprice sensitivity analysis in the IEEJ Outlook 2020, particularly, I noted that LNG demand in 2050 inthe Low Price Case assuming LNG prices as remaining unchanged from current spot LNG price levels
would be some 60% more than in the Reference Scenario assuming the price of some $10 per million
British Thermal Units, contributing to resolving Asia’s energy trilemma. Participants in the conference
proactively gave questions and opinions about the concept and significance of the price assumption,indicating their great interests in the matter. Naturally, however, there are complicated marketplace
1

IEEJ：December 2019 ｃ○IEEJ 2019problems including whether massive investment to meet demand growth could be realized even atcurrent spot LNG price levels. In this sense, a common challenge for Asian market stakeholders would
be how to explore conditions for balancing the sound expansion of LNG supply with that of demand.
Second, I would like to note that vigorous discussions on the future Chinese market came at
the conference, indicating LNG market stakeholders’ high interests in the Chinese market. Although
the center of global LNG demand growth is expected to shift to emerging markets such as India andthe Association of Southeast Asian Nations over a long term, it is natural for LNG market stakeholders
to have high interests in the future course of the Chinese market that has become the world’s second
largest LNG importer and is still expanding demand and imports. Particularly, how far China wouldexpand LNG imports would be the greatest matter of interest to the demand side in the Asian market.
At the conference, however, participants pointed out that there are diverse, complicated factors thatwould exert influence on China’s future LNG imports. They range from macro factors such as
economic growth and environmental regulations to gas market supply and demand factors including
domestic gas production, pipeline gas imports and the Chinese government’s gas market reform.
Impressively, arguments on China indicated anew that China is considering various policies
and strategic responses after its substantial expansion of LNG imports in winter 2017 tightened thesupply-demand balance on the spot LNG market and pushed up spot LNG prices to its disadvantage.
One of the impressive arguments emphasized China’s plan to expand and utilize underground natural
gas storage reserves. It was interesting that the argument indicated China’s attitude of taking advantage
of such inventories or reserves for procuring LNG imports more efficiently. In China, oil importdependence has risen close to 70%. Gas import dependence has also increased close to 40%. Given
that the utilization of inventories or reserves would contribute to improving China’s gas supply
security, the Chinese government could give higher priority to gas inventories or reserves. Its relevant
initiatives will attract attention.
Third, I would like to point out that participants in the conference presented numerous
opinions and questions about coal and renewable energy competing with gas and LNG, indicating highinterests in the competitors. If gas decarbonization is required as seen in Europe, the gas market
environment may change greatly. In Asia with hopes placed on economic growth, however, lowcarbonization and cleaner energy will be given priority before decarbonization. At the same time, gas
price affordability is a key challenge to support growth and protect low-income people in Asia.
While gas and LNG demand growth is expected, switching from coal to gas is likely tocontribute to low-carbonization and cleaner energy expansion. However, there is a challenge regarding
price affordability. A sharp rise in the competitiveness of gas and LNG can resolve the challenge, butin reality it would not be easy. It was also interesting that whether gas and LNG would expand alongwith renewable energy by responding to renewables’ intermittency or compete with renewables wascontroversial in the conference. An argument noted that as renewable energy expands substantially,gas-fired power plants’ economic efficiency may deteriorate due to the merit order in a competitiveelectricity market, exerting downward pressure on gas demand. Arguments at the conference thus
indicated that complicated factors and conditions exist in regard to the relationship between gas andrenewable energy.
Undoubtedly, gas and LNG as energy sources have various advantages. However, they are2

IEEJ：December 2019 ｃ○IEEJ 2019
not perfect energy sources. No energy sources are perfect. It is a challenge for Asia to further promote
gas and LNG while attempting to overcome their disadvantages in pursuit of the best energy mix.

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

3