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Asia: still the key

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LNG Industry,

Before the oil price collapse nearly two years ago, it was thought that energy hungry Asian gas markets would absorb most of the new wave of US LNG, which was then on the cusp of entering the global LNG market. Indeed, LNG exports from the mainland US, made possible by the shale gas boom, have now started, with Cheniere Energy shipping its first cargo in February 2016. Although the tanker shipping the chilled gas out of the Gulf of Mexico was called Asia Vision, it was not headed for Japan, China, Taiwan or South Korea, but to a destination perhaps thought unlikely in 2014 to receive US LNG – Brazil.

Market fundamentals have shifted since just before the oil price crash in mid-2014. Asian gas demand growth has slowed as a swathe of additional liquefaction capacity from Australia and the US has, or is poised to, enter the market. As a result of these softer fundamentals, dozens of proposed LNG export projects not yet awarded a Final Investment Decision (FID) have been shelved, with plans to sanction them by investors unlikely until the supply-demand balance tightens again.

Nonetheless, although expectations of a fast-growing Asian appetite for LNG have been tempered for now, Asia will remain a key region for exporters in the long-term. Asia accounts for over two-thirds of LNG imports and, in time, its requirement for additional volumes of LNG will pick up some momentum. Should policymakers in several Asian markets successfully pursue a shift away from coal and oil in the power sector (to lower carbon sources, such as natural gas), then this momentum will be stronger…

This article was originally published in the June 2016 issue of LNG Industry magazine. To read the full version of this article, please sign in or register for a free trial subscription.

Written by Peter Kiernan, The Economist Intelligence Unit (EIU), UK. Edited by David Rowlands

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