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Robust Outlook for SEA Gas Market
12/4/2012
Price Adjustments Required to Address Tight Gas Market Ahead

12 APRIL, 2012, Singapore – Southeast Asia will be an attractive area for gas activity in the near term, amidst growing demand for energy in this region and across the world, according to the International Gas Union (IGU).

Across the globe, energy requirements are expected to increase in tandem with growing population, economic expansion, individual’s prosperity and urbanisation. It is projected that the world will consume 35% to 40% more energy by 2030 than in 2005. Two-thirds of this future energy demand will stem from emerging markets like China and India.

While Asia Pacific is the second largest LNG exporter in the world, the region contends with a demand-supply gap for natural gas with demand increasing at an Annual Average Growth Rate (AAGR) of 13.4% between 2000 and 2011. China and India collectively contribute to about 25% of the region’s aggregate gas demand since 2008. Natural gas demand in countries such as Pakistan, Bangladesh, Thailand, Vietnam, Singapore, Indonesia and Malaysia are also expected to increase by 2015.

“Active regasification projects in Southeast Asia are expected to set the stage for future economic developments in the region by averting gas shortages and enhancing long-term supply security,” said Datuk Dr Abdul Rahim Hashim, President of the International Gas Union (IGU).

Over the next five years, regasification projects in ASEAN countries such as Thailand (operational since 2011), Malaysia (2012), Singapore (2013), Indonesia (2014), and Vietnam (2017) are expected to deliver 37 MTPA of regasification capacity as a whole. Currently, Indonesia and Malaysia the world’s second and third largest LNG exporting countries in the world respectively.

Tight market ahead: Price adjustments

In spite of new gas initiatives for existing and unconventional in the region, China and India have considerably increased their LNG imports in recent years and together accounted for 15.2% of the total LNG imports in Asia in 2010. India and China are currently the biggest LNG buyers from Qatar and Australia.

The impact of Fukushima’s incident in 2011 which contributed to the substantial spike in gas and LNG demand in the wider Asia-Pacific region will continue to affect further heightening competition for LNG supplies in the near future. 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. Additionally, the region would need to ensure respective domestic market obligations are first met.

“Energy security has always and will remain as a strategic issue, against the backdrop of declining production and depleting reserves,” Datuk Dr Rahim Hashim said.

“It is imperative for ASEAN member countries to accelerate and embrace full gas market liberalisation. While subsidised gas prices continue to distort the market, and “artificially” boost higher demand, this is not sustainable in the long-term, he said.

Dr. Rahim warns that increasing reliance on LNG imports which are based on market price will leave Southeast Asian economies little option but to progressively increase gas prices to be near or at market parity in key gas consuming countries in this region. Upward revision of prices towards market-based mechanism will also serve as incentive for third party players to enter the market.

Competition for, control of, and securing reliable access to those supplies, have been a driving factor in global prosperity and security. Whilst for much of the 20th century, oil has taken centre stage in the high-stakes game of geopolitical power play, the growing prominence of natural gas has seen this commodity rapidly gaining in geopolitical importance.

“Geopolitics and Natural Gas,” will be a one of the four daily themes in the upcoming 25th World Gas Conference will examine the interplay between economic and political factors in the development of natural gas resources. Due to the global nature of the gas industry and of concerns for energy security, the IGU established a special Task Force to conduct in-depth research over the past three years with industry captains, policy makers and economic organizations.

The 25th World Gas Conference (WGC2012), organised by the IGU, 4-8 June, 2012, Kuala Lumpur will stage industry captains who will, amongst others, also offer perspectives on gas pricing, security of supply and liberalisation of the gas industry.

By maintaining close ties with many other international energy organisations and co-operating with governments, policy makers and multi-lateral agencies, the IGU has been working with its international members, for many years, to promote the technical and economic progress of gas, presenting its research findings at the World Gas Conference every three years.

For more information on WGC2012 or to register, visit www.wgc2012.com. To follow WGC2012 on LinkedIn, please visit http://ow.ly/73nMx. Delegate registrations close on 30 April 2012.

Source: WGC2012 website “Wholesale Gas Price Formation”, AGPS Talking points

About WGC2012

Since 1931, the International Gas Union has been organising the World Gas Conference once every three years; the triennial World Gas Conference and Exhibition is the biggest and most important global gas industry event, attracting 5,000 industry professionals from all over the world and showcasing the latest developments, with information on policies, strategies technologies, challenges and opportunities. The 25th World Gas Conference will take place in Kuala Lumpur, Malaysia, 4-8 June 2012 with the theme “Gas: Sustaining Future Global Growth.”

WGC2012 It will feature 14 keynote speakers, 10 strategic panels, 4 Luncheon Addresses, 42 Technical Sessions, 135 Poster Sessions, expert forums and 3 task force sessions. The event also has a 10,800sqm exhibition with 270 companies from over 80 countries, showcasing the latest in technologies and developments within the gas industry.

About IGU

The International Gas Union (IGU), founded in 1931, is a worldwide non-profit organisation promoting the political, technical and economic progress of the gas industry with the mission to advocate for gas as an integral part of a sustainable global energy system. IGU has more than 110 members worldwide and represents more than 95% of the world's gas market. The members are national associations and corporations of the gas industry. The working organization of IGU covers the complete value chain of the gas industry from upstream to downstream. For more information please visit www.igu.org.

WGC2012 Conference Secretariat

Level 20, Tower 1, Etiqa Twins

11, Jalan Pinang

50450 Kuala Lumpur, Malaysia

Tel: +60 3 2171 3477 / +60 3 2171 3575

Fax: +60 3 2171 3535

Email: media@wgc2012.com

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