The future of the Asian gas market is contingent on developing new liquefied natural gas and pipeline infrastructure as well as there being a stable and incentivised investment climate, an international economist has said.
The main challenges ahead are a lack of infrastructure – mostly cross-border pipelines, the high investment costs required for unconventional gas development, the lack of integration of gas markets and the absence of gas-to-gas competition and of a complementary trading hub, according to Armelle Lecarpentier, chief economist at Cedigaz.
She told the 21st World Petroleum Congress in Moscow’s framework session 17: 'Meeting the growing demand for gas from Asia – implications for supply and transportation' that this was a task with faced with many challenges.
One key concern is “the lack of an investment climate in some countries because of the subsidy regime which has helped to maintain very artificially low prices that have boosted gas consumption but, at the same time, discourage upstream investments”.
The region is without a gas trading hub and Lecarpentier does not think that Singapore's stated aim to become an LNG trading hub will come about, at least not in the short term.
“I think it will take many years before Singapore starts to become a reliable hub... Singapore is well-placed to become a trading hub because the free market approach of the government is promoting the development of a trading hub with the implementation of a market-based model with the involvement of a large number of participants with spot LNG import credits.
“But the problem of Singapore is that beyond this policy there is a lack of liquidity on the market because the energy market of Singapore is quite small up to now,” she told Upstream, adding that Singapore did have the advantage of already being well connected to other gas markets, not only by pipeline.
Singapore's maiden LNG receiving and regasification project came into operation with a capacity of 3.5 million tonnes per annum that was increased to 6 million tpa and will be further expanded to 9 million tpa in future.
Speaking of floating LNG (FLNG), Lecarpentier told delegates that the Asian market would see the emergence of floating liquefaction “but due to the nascent quality of the technology, which is at a very early stage of development, the advantage – in terms of cost control – remains to be proven”.
Cedigaz is an international not for profit association dedicated to natural gas information, based near Paris.