Improving gas and LNG infrastructure in Asia-Pacific

Kovid Rawat's picture
Kovid Rawat, Research Analyst, Energias Market Research & Consulting
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Asia-Pacific is a fast-evolving gas market characterized by destination restriction, orthodox policies and monopolistic domestic supply infrastructure. However, the scenario is set to change as major Asian countries are liberalizing the gas policies. The ending of long-term contracts has given way to more flexible spot market in Asia. Asian economies are to be benefitted from falling gas prices that provides an incentive for the government to develop gas infrastructure to support gas penetration in the domestic market. Some of the countries in Asia are new to the gas market and yet to develop gas infrastructure while others have relatively developed infrastructure, have devised policies to enter into LNG trading. Asia-Pacific with three largest gas consumers Japan, South Korea, and Taiwan along with Australia which is the second largest gas producer is set to be a gas market hub in near future.

Asia-Pacific consumers around half of the world’s LNG demand, therefore, a good many liquefaction and regasification projects are poised to come online in the region. Around 20 receiving terminals are under construction representing around 70% of the new regasification capacity worldwide. The advanced infrastructure such as Floating Liquified Natural Gas (FLNG) and Floating Storage and Regasification Unit (FSRU) is able to monetize gas over a short duration caters to the demand of small isolated market such as Bangladesh and Pakistan that face chronic gas shortage. Further, new Liquefaction projects such as Australia Pacific LNG, Gorgon LNG, and Sabine Pass LNG, along with additional trains at Queensland Curtis LNG (QCLNG), Gladstone LNG (GLNG) and Malaysia LNG (MLNG) will enhance the liquefaction capacity of the region.

In the era of energy, mix LNG has taken a lead due to its cleanliness, reliability and sustainable supply from natural gas reserves. Some of the Asian countries where major infrastructure activities are taking place are Japan, South Korea, India, Indonesia, Australia, and Malaysia.

Japan is taking advantage of its LNG oversupply and flexible US LNG supply to bolster LNG trading scenario. The country is expanding its regasification capacity, and added the 1 MTPA Hitachi terminal in 2016 with this Japan accounted for 25% of the world’s regasification capacity. Further, Soma LNG is under construction and is expected to be operational by 2018. Japan has low domestic gas pipeline coverage hence many high-pressure pipeline construction are underway such as Ibaraki-Tochigi pipeline constructed by Tokyo gas.

South Korea, the world’s second-largest LNG importer has 101 MTPA of regasification capacity. The country further added 3 MTPA of capacity after completing the Boryeong terminal in 2017. South Korea has learned from the mistake of Japan’s Fukushima nuclear disaster and is set to scrap out cheap power derived from nuclear power plants. Further, the president has a clean energy development plan worth $12.2 billion thus giving impetus to LNG powered power production in the country.

India is emerging gas market with a focus to increase the gas grid infrastructure. The country has over 16,000 km of existing gas pipelines and around 28,000 km domestic pipelines are under construction or proposed. These pipelines will create a gas infrastructure that will connect the east and west coasts of India taking country close to establishing a gas grid connecting all the high demand areas of the country.

Asian countries are careful in choosing the best solution for their energy mix. Nuclear energy is a cheap energy source but it is like a dormant volcano that has an ability to cause a catastrophe. Coal-derived energy has environmental concerns. The best possible solution is natural gas that is being fast capitalized.

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