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.