With energy suppliers preferring Europe over Asia in offering favourable deals, India on Tuesday called large consumers in the region like China, Japan and Korea to forge an Asian buyers’ block to extract price discounts.

Despite most of the growth in natural-gas demand coming from Asia, energy suppliers sell fuel to the region at a rate which is higher than the so-called premium markets of Europe.

Oil Minister M. Veerappa Moily termed this difference in price as Asian premium and suggested that India, China, Japan and Korea — four of the top five energy consumers in the world — can forge a alliance to get favourable pricing from natural gas suppliers in the Gulf and elsewhere.

“We understand that it’s not only demand supply imbalance, which govern prices for Asian markets. There are other elements too which determine the Buyer-Seller relationship.

“It has been observed in some recent deals that prices offered by the same seller to Europe and Asia vary greatly, beyond net back and business considerations,” he said addressing the eighth Asia Gas Partnership Summit in New Delhi.

Mr. Moily said Asian buyers need to look into their sourcing and pricing strategies.

Asian buyers, he said, “will have to emerge united in their approach. Large Asian buyers coming together may negotiate from a position of strength.”

He said one of the reasons for the Asian Premium could be that Asian markets lack a transaction platform to transparently trade natural gas or liquefied natural gas.

“With growing Asian demand and increasing LNG trading, there is a case for the emergence of a trading hub in Asia which would facilitate hub indexation which is more linked to actual natural gas market fundamentals in the Asian region,” he said.

Growth in gas consumption in these emerging markets, he said, will crucially depend upon affordability and stability of prices at which gas is going to be sourced.

Energy sellers and buyers must see mutual benefit in each other’s progress and share investments and profits as partners and not rivals, he said.

Recent developments like the US shale gas revolution which has turned America into a gas exporter from an importer and increase in LNG trading, are going to bring fundamental changes in the global gas market.

Mr. Moily also saw scope for integrating energy assets amongst India’s neighbours — Sri Lanka, Pakistan, Myanmar, Bhutan and Bangladesh.

“Such cooperation will not only enhance competitiveness but will also improve relationships in the region. Efforts in this regard are already underway through various proposals,” he said.

Moily said with many new LNG projects in various stages of planning and construction, it is high time that Asia too gets the benefit of gas to gas competition without oil dynamics affecting gas prices.

State gas utility GAIL has been able to secure LNG contract index based gas prices in the US rather than tradtional practice of pricing them in line with oil rates.

Natural gas, accounting for 24 per cent of the total primary energy supply, is the third largest contributor to the global energy basket, and, with a CAGR of about 9 per cent over the last five years, it is growing at the fastest rate among fossil fuels.

The growth of natural gas is primarily being driven by emerging markets in Asia, Africa and South America, he said adding North America and Europe, which account for about 60 per cent of the total global gas consumption, have witnessed subdued growth rates of up to 1.5 per cent in the last five years.

On the other hand, it is the emerging markets in Asia like India and China, which have witnessed impressive double digit CAGRs in gas consumption over the last five years.

The Asia Pacific region has witnessed the fastest natural gas demand growth globally to reach a total demand of 625 BCM in 2012, while total global demand stood at 3,315 BCM. Unlike Europe, the lack of pipeline import infrastructure for key importers in Asia has created a reliance on LNG imports which meet 80 per cent of import requirements.

The region remains the largest LNG importer in the world accounting for 69.3 per cent share in global LNG imports of 327.9 BCM in 2012.

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