ASEAN countries could face tough competition from India and China to secure LNG supplies

Asserting that the days of subsidized gas were over and the order will have to change to achieve sustainable growth, the International Gas Union has projected that the world will consume 35 per cent to 40 per cent more energy by 2030 than in 2005, in tandem with growing global population, economic expansion, individual's prosperity and urbanisation.

However, as the export and domestic markets are competing for similar resources, sustaining supply security remains highly challenging against the backdrop of declining production and depleting reserves. BP Statistical Review of World Energy (June 2011) research shows that between 2000and 2011, the demand-supply gap for natural gas in Asia Pacific increased at an Annual Average Growth Rate (AAGR) of around 13.4 per cent. Much of the increase in gas demand in Asia Pacific comes from emerging economies like China and India, together contributing to around 25 per cent of the region's aggregate gas demand since 2008. Additionally, China and India have considerably increased their LNG imports in recent years and together accounted for 15.2 per cent of the total LNG imports in Asia in 2010.

India and China are currently the biggest LNG buyers from Qatar and Australia. To meet future rise in demand, Japan, Korea and Taiwan are expected to source additional LNG cargoes from the same suppliers. As a result, IGU predicts that ASEAN countries (Malaysia, Singapore, Thailand and Vietnam) could face tough competition from these traditional East Asian buyers to secure LNG cargoes from the same sources.

“Of course, we will have more energy choices, but these renewable technologies remain marginal, inefficient, costly without subsidy and relatively unreliable in the absence of game-changing innovations. Therefore, going forward, we will have to become smarter about using energy more efficiently with the aim to prolong the lifetime of existing cleaner energy sources, such as gas. So we must have pragmatic and cost-effective ways to improve energy efficiency and encourage conservation. The stakes are high and will become even higher unless we get it right early,” Dr. Abdul Rahim Hashim International Gas Union president, said.

The days of subsidised gas will soon need to change in order for the gas industry in Asia Pacific to achieve a sustainable growth, he said. “There is a need to restructure and liberalise our electricity and gas markets. It is imperative that energy at-large and gas in particular, is priced at market rates to reflect its true cost and value. This ensures the right incentives throughout the energy-value chain, to encourage efficient usage and to ensure continued investments in the upstream sector,” he remarked.

Dr Abdul Rahim said the affordability and pricing of gas needs to be set against a backdrop of political considerations, gas price elasticity, the context of the fuels gas might compete with, and price volatility. There must also be considerations relating to how carbon tax or ‘cap and trade' policies might affect gas price formation, and whether a price formation mechanism is warranted.

More In: Economy | Business