Asian LNG market to could see rapid growth: Report
Asian LNG market to could see rapid growth: Report
LONDON (Reuter): Asia's liquefied natural gas market could see rapid growth in coming years due to a widening supply-demand gap despite new Gulf producers coming on stream, Morgan Stanley said in a report.
The Monthly Energy Perspectives-August 1997 report also said the projected global excess demand equated to the need for one world-class plant by 2005 and 10 by 2010 -- big business given the cost of $10-$11 billion per project.
The LNG trade -- accounting for four percent of world gas production against 84 percent consumed locally in producing countries and 12 percent transported by pipeline -- is concentrated in Europe and Asia where the gas is mainly used in power generation.
Global demand is set to reach 95.8 million metric tons per annum (mmtpa) by 2000 from 84.3 mmtpa in 1996 and 117 mmtpa by 2005 -- the biggest slice going to economic powerhouses Japan and South Korea, the report said.
However, if new markets like India or China enter the picture, demand could skyrocket to 170 mmtpa by 2010, added the report prepared by the Morgan Stanley Global Energy Team.
Supplies will almost match demand in the short-term, with shortfalls of only 2.8 mmtpa by 2000, but the gap is set to widen to 11 mmtpa by 2005 and more than 70 mmtpa by 2010 as supply goes flat to downward.
"Asia's LNG market is expected to enter a period of rapid change and growth, with Japan expected to remain the dominant consumer," the report said.
"Sales to Korea and Taiwan are expected to grow, but the greatest potential is the new markets of India, Thailand, Philippines and China," it added.
LNG -- or chilled methane condensed into a liquid that can be transported by insulated ships -- is attractive as a means of bringing clean-burning gas to regions that can't be served economically by pipeline.
At 48.8 mmtpa, Japan is the world's biggest LNG importer currently, with supply from Abu Dhabi, Alaska, Australia, Brunei, Malaysia and Indonesia. Japan's LNG demand alone is expected to hit 50.5 and 58 mmtpa by 2000 and 2010 respectively, the report said.
"LNG demand in Japan is now at a mature stage, and in future is likely to depend on the pace of economic growth, price trends and electricity demand," the Morgan Stanley report added.
Japanese utilities are under great pressure to reduce the price of electric power, and 70 percent of the imported gas is used for power generation, it said.
In second position comes South Korea whose demand for natural gas will reach 15.7 mmtpa in 2000 and 34.2 mmtpa by 2010, from 10.3 in 1996, the report added.
India's need for 50,000 Megawatts of generating capacity over the next five years could mean 4 mmtpa of LNG demand if natural gas is used to 15 percent of this generating capacity, the reported noted.
In China, the market-bearable price of LNG to produce electricity will depend on the extent of competition from utilities fired by coal or fuel oil, it noted.
The main LNG producers are Indonesia, Malaysia and Australia, but Gulf countries like Qatar and Oman are emerging as new competition, Morgan Stanley said.
The estimated LNG supply rise to 93 mmtpa in 2000 against 84.3 last year will be mainly due to new Qatari production as well as supplies from Trinidad and Tobago.
With Oman coming on stream, LNG supply should top the 105 mmtpa mark in 2005 -- partially covering production cuts from Indonesia's Arun contracts.