IEEJ: October 2013 All Right Reserved
Special Bulletin
A Japanese Perspective on the International Energy Landscape (144)September 13, 2013

Significance of the Second LNG Producer-Consumer Conference
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn September 10, the second LNG Producer-Consumer Conference took place at theGrand Prince Hotel New Takanawa in Tokyo. At the meeting following the first one held last year,
experts from LNG producing/exporting and consuming/importing countries discussed challenges
and solutions for the sustainable development of the liquefied natural gas (LNG) market.
At the conference, keynote speeches were delivered by ministerial representatives
including Economy, Trade and Industry Minister Toshimitsu Motegi from Japan as the host of themeeting, Energy and Industry Minister Mohammed Bin Saleh Al-Sada from Qatar as the world's
largest LNG exporter, and Petroleum & Natural Gas Minister Veerappa Moily from India. Chief
executive officers from companies representing positions of LNG producing and consuming
countries participated in discussions at four sessions. At a lunch session, International Energy
Agency Executive Director Maria van der Hoeven made a special presentation. LNG experts
attended a special session for discussion on challenges for LNG market. The number of participantsin the second conference increased substantially from about 600 at the first one to about 1,000,
making the conference one of the biggest international meetings hosted by Japan on energy issues.
Last year's LNG Producer-Consumer Conference attracted global attention as the first eversuch meeting. Key points for the second that came one year after the first one included how
discussions would be deepened, what market developments would help deepen discussions and how
policymakers and market participants would address these developments.
In this sense, it is important to review major changes or developments in LNG market overthe past year. The first development was the U.S. government's approval on a project for LNG
exports to Japan that has no free trade agreement with the United States and which must obtain suchapproval to import LNG from the U.S. At last year's meeting, which came before the approval,
participants discussed various impacts of the planned U.S. LNG exports to Japan on the future Asian
LNG market. But the U.S. Energy Department's approval on the Freeport LNG project May this year
allowed the project to make a step forward to a market reality. Just after the second meeting, theCove Point LNG project was also approved for export to Japan. In this way, the second conferencecame as LNG market participants grew more confident that U.S. LNG exports to Japan or Asia
would actually expand.

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Second, attention-attracting developments came in Russia on the supply side. TheVladivostok LNG project had traditionally been expected to represent Russia's expansion into theAsian LNG market. Earlier this year, however, new players including Rosneft and Novatek indicatedaggressive moves for LNG exports. Russia's negotiations with China on pipeline gas supply to China
have also made a progress that could be seen as a step forward to a final contract. Given theabovementioned moves for U.S. LNG exports, new Russian gas export projects are expected to facevarious challenges and uncertainties. But we must pay attention to these developments involving thenew important gas supply potential close to the Asian market.
Third, interesting developments have been seen on the demand side over the past year. In
Europe where overall energy demand has slackened due to a recession, particularly, demand fornatural gas including LNG has declined substantially as inflow of surplus coal from the UnitedStates under the shale revolution has been coupled with policy support for renewable energy. Thisphenomenon was going on when last year's LNG Producer-Consumer Conference took place. Butmarket participants have only recently begun to actually recognize the impacts of the phenomenon.
This year's conference came as the phenomenon indicated that demand for even natural gas or LNG
preferred as a clean energy source can be affected by competition from other energy sources. In
Japan that has driven the recent global LNG demand growth, moves to restart nuclear plants havegrown with interests rising in coal as a competitive energy source under the current energy supply
and demand situation. In this sense, the demand side is urgently required to procure LNG at morecompetitive prices.
Under the new situation, the second conference came amid the recognition that "the door isopen to competitive gas" as indicated by the subtitle of the conference. The subtitle represents thepresent situation where the door is open, though with competitive gas supply yet to be realized.
There may be various views about competitive gas supply, depending on personal differences
between positions.
In major Asian LNG consuming and importing countries including Japan as the host of thelatest conference, calls have grown for LNG procurement at competitive prices and stakeholders
have begun to explore specific measures to that end. Toward the latest conference, Japan proposed toutilize achievements through its joint research with the European Commission and India. In addition,
the Institute of Energy Economics, Japan, offered at the conference to launch an international study
panel on LNG market to expand the scope of cooperation. The progress in these efforts was one ofthe achievements at the conference. While cooperation between LNG consuming countries hasgrown even more important, geopolitical environments for Japan, China and South Korea as key
players in the Asian LNG market have grown more difficult along with Japan-China andJapan-South Korea bilateral relations. We must pay attention to the fact that various challenges exist
for promoting cooperation between LNG consuming countries.
Meanwhile, the supply side (including LNG producing/exporting countries and theirrelevant enterprises) is also required to take measures for achieving competitive gas supply in thefuture. In fact, however, conference participants pointed out that: huge investment is required in2

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capital-intensive LNG projects; LNG projects should be based on the recent trend of rising costs;
and that uncertainties about long-term LNG demand outlooks emerge from various factors and could
become challenges for forming LNG supply projects. The conference's function as a platform for
frank discussions on challenges for LNG suppliers and consumers, even without their full agreement,
would undoubtedly be important for the LNG market's future development. I would like to see theLNG Producer-Consumer Conference develop as a forum for stakeholders to gather their wisdom for
the LNG market's great development in the true sense.

Contact: report@tky.ieej.or.jp
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