(EnergyAsia, February 22 2013, Friday) — Focus on Southeast Asia’s smaller but faster growing economies, and move India to the back row.
That’s the advice energy consultant Wood Mackenzie is giving liquefied natural gas (LNG) suppliers as it predicts the combined market of Indonesia, Thailand, Malaysia and Singapore offers far better returns.
By 2025, Southeast Asia’s LNG consumption will have risen 45 million tonnes/year to account for a third of Asia’s LNG demand growth, more than double India’s consumption increase of just 20 million tonnes/year.
“Recent developments in Indonesia and Thailand have helped strengthen the outlook for very strong Southeast Asian LNG demand growth,” said Wood Mackenzie’s senior gas market analyst, Nicholas Browne.
“In India, we are now seeing faltering domestic gas production and this is expected to limit the development of the gas market. Perhaps counter-intuitively to some, reduced gas production will also lower the rate of LNG market growth in India.”
He expects Indonesia to become a major LNG consumer to the point that demand will eventually outpace domestic supply.
“Early coal bed methane pilot well results in South Sumatra indicate that production will not meet previous expectations providing more headroom for LNG,” he said.
Mr Browne expects Thailand to consume more natural gas in favour of coal for power generation.
“This will drive LNG demand significantly post-2020 as indigenous gas and pipe imports will be unable to meet the demand,” he said.
India faces the prospect of declining domestic supply with production faltering at Reliance’s key D6 block, down from a peak of 20 billion cubic metres (bcm) in 2010 to 11 bcm in 2012. Wood Mackenzie forecasts production from D6 to continue falling, reducing the overall outlook for Indian gas production.
Mr Browne said: “This will constrain gas availability to the market, mainly impacting the power sector in the medium term. In the longer term, reduced production will preclude the development of greenfield fertiliser production as it is not economical to develop facilities purely based on LNG imports.
“In addition, LNG demand growth in other industrial sectors is further limited by reduced economic growth expectations.”
Overall, Asia’s LNG demand will remain strong with China expanding its LNG import infrastructure, and Japan and Taiwan moving to reduce their dependence on nuclear power.