(EnergyAsia, November 13 2016, Sunday) — Asia’s ‘Big Four’ economies of China, Japan, India and South Korea will continue to dominate the region’s liquefied natural markets (LNG) over the next 15 years, according to a recent study by the Oxford Institute for Energy Studies (OIES).


Asia’s Low and High LNG Import Scenarios, billion cubic metres

                                                Low-Growth Scenario                                    High-Growth Scenario

2015                        2020      2025      2030                                          2020      2025      2030

Japan                       115.7                       86.0        86.5        80.6                                            124.6     124.7     120.3

China                       27.2                          54.0        46.0        75.0                                            79.0        66.0        105.0

India                          19.9                          30.0        50.0        66.0                                            36.0        60.0        79.2

South Korea        45.5                          44.8        45.8        47.5                                            46.9        49.6        52.7

Subtotal          208.3                       214.8     228.3     269.1                                         286.5     300.3     357.2

Compounded Annual Growth Rate

– 2015 to 2030 (15 years)                1.72%                                                                           3.66

 

                                                Low-Growth Scenario                                    High-Growth Scenario

Taiwan                     19.7                          20.3        21.6        22.9                                            22.4        26.8        32.1

Singapore             2.8                         6.6           10.7        13.8                                            6.9         11.4        14.9

Thailand                  3.7                           11.0        20.4        22.5                                            13.9        26.8        31.2

Malaysia                   2.1                         3.7           5.0         6.2                                             3.7         5.0         10.7

Pakistan                  1.4                           10.0        14.0        14.0                                            12.0        16.0        26.0

Bangladesh         –                               4.0           8.0         18.0                                            6.0         16.0        26.0

Vietnam                   –                               –                 4.4         9.1                                             –               5.7         11.4

Indonesia              –                                 –                –                9.3                                             –               4.9         20.8

Subtotal          29.7                          55.6        84.1        115.8                                         64.9        112.6     173.1

Compounded Annual Growth Rate

– 2015 to 2030 (15 years)                9.50%                                                                           12.47%

 

                                                Low-Growth Scenario                                    High-Growth Scenario

TOTAL              237.9                       270.4     312.3     384.9                                         351.6     412.9     530.1

CAGR: 2015 to 2030 (15 years)                    3.26%                                                                                             5.49%

Under a slow-growth scenario, the OIES expects the Big Four’s combined LNG imports to increase at an annual rate of 1.72% from 208.3 billion cubic metres (bcm) in 2015 to 269.1 bcm in 2030. In a fast-growth scenario that more than doubles the annual import rate to 3.66%, the four countries will purchase a total of 357.2 bcm in 2030. Most of the imported LNG will be consumed domestically.

Asia’s other current LNG users, Taiwan, Singapore, Thailand, Malaysia and Pakistan, imported a combined 29.7 bcm of the fuel last year, just slightly more than China’s 29.2 bcm. OIES expects the next wave of LNG users in Bangladesh, Vietnam and Indonesia to import between 36.4 bcm and 58.2 bcm in 2030.

Combined, the LNG imports of these eight smaller Asian economies will grow by an astonishing annual rate of between 9.5% and 12.5% through 2030. These projected rapid growth rates are due largely to their low starting base of 29.7 bcm in 2015.

Given the Big Four’s slower growth prospects, OIES expects their combined share of Asia’s LNG imports to decline from 87.5% last year to between 67% and 70% in 2030. Conversely, the combined share of the smaller eight economies will rise from last year’s 12.5% to between 30% and 33%.

Japan to remain Asia’s leading LNG importer

Japan, Asia’s LNG pioneer, will remain the region’s biggest importer and consumer despite China’s rapidly rising appetite for the fuel, said the OIES study.

As the world’s largest LNG importer, Japan will also be one of the industry’s biggest wild cards amid the country’s uncertain energy outlook and Tokyo’s push to revive the use of nuclear energy that once generated 30% of the country’s electricity. The public does not trust official assurances over the safety of nuclear energy following extensive damage to the giant Fukushima plant from the earthquake-tsunami tragedy of March 2011. The plant is still leaking radiation into the Pacific Ocean with repairs far from completed and the government’s refusal to be open about the subject.

Since Fukushima, Japan has boosted LNG imports to replace about half of the nuclear feedstock needed to generate about 30% of the country’s electricity. LNG will likely remain the main fuel of choice ahead of oil and coal even if Tokyo succeeds in boosting nuclear energy’s share of the projected electricity mix to 20% to 22% by 2030, according to the Institute of Energy Economics Japan.

Given the unpredictability of the country’s energy plan, the OIES has issued a wide-ranging forecast for Japan’s LNG imports over the next 15 years. The slow-growth scenario sees imports decline from 115.7 bcm in 2015 to 80.6 bcm in 2030, while the fast-growth case calls for a surge to 120.3 bcm.

China

Unlike Japan, China has far greater choice in sourcing for its natural gas supplies. It is able to import natural gas through its growing pipeline links with Central Asia and Myanmar, and LNG through a network of import terminals along its eastern coastline. China is also boosting domestic production by tapping its substantial conventional and coalbed methane reserves that alongside plans to process coal into natural gas. Beijing has set a target to raise its annual domestic gas production to between 400 bcm and 420 bcm by 2020, up from 138 bcm in 2015, according to BP.

The OIES study said China must step up reforms of its natural gas market to boost consumption of the clean-burning fuel to replace oil and coal. Despite the collapse in energy prices since mid-2014, LNG and piped natural gas remains more costly than oil and coal.

Citing consultant Wood Mackenzie, the OIES said China currently faces an annual oversupply of 18 bcm of natural gas, and should look to boost the fuel’s use for transportation.

Given Beijing’s commitment to cleaning up the country’s heavily polluted cities, the OIES expects China’s LNG imports to rise from 27.2 bcm last year to between 75 bcm and 105 bcm in 2030.

Asia

Despite the generally bright outlook for Asia’s gas demand, the OIES study said the region’s market still faces challenges from volatile energy consumption growth and uncertainties over energy mix.

Following last year’s international agreement in Paris to combat climate change, governments throughout Asia must take steps to reduce greenhouse gas emissions, promote energy efficiency and conservation, and increase the use of renewables.

“While an indicative share for gas in the energy mix is often included in policy documents, competition with cheaper coal in the power sector is an open issue which requires a more robust policy framework than generally exists at present,” the OIES study said.

As such, policy makers must help LNG shed its current status as a premium fuel. The study suggests that the industry can play a key role by de-linking the fuel’s import price to oil, and to re-market LNG as a replacement for coal in Asia’s search for a lower carbon future.