| TOKYO, Sept 21
TOKYO, Sept 21 Asia's energy-hungry nations may
be finally making headway in their push to scrap oil-linked
natural gas prices as the high cost of the fuel threatens
economic growth, especially in Japan, the world's top importer
of liquefied natural gas.
Removing the link between gas prices and oil and moving to
the so-called hub pricing would drastically cut the cost of
importing natural gas, but producer countries like Qatar have
long opposed such moves.
LNG is expensive in Asia at about five times the
cost of natural gas in the United States where a shale
oil and gas boom has driven down prices.
"We are prepared to adjust to revolutionary thoughts. I do
think we are hearing this message," Thomas R. Walters,
vice-president of Exxon Mobil Corp and head of its gas
and power marketing arm, told a conference of LNG producers and
consumers this week in Tokyo.
At the conference, the first of its kind in Japan, consumers
from Tokyo Gas Co to India's ONGC sounded the
clarion call for cheaper fuel.
And producers who have benefited from high LNG prices in
Asia -- as Japan hoovered up as much as it could on the spot
market -- say they are now listening.
LNG prices in Asia have nearly doubled since March 2011 to a
peak of $18 per mmBtu in May this year.
"There will have to be a hub developed in Asia like in the
U.S. and Europe," Charif Souki, chairman and chief executive
officer of Cheniere Energy Inc, told Reuters.
Under a decades-old system, Japan and South Korea, the two
largest LNG importers, tend to buy most of their long-term LNG
supplies through long-term contracts, with prices linked to oil.
PRODUCERS MUST ADAPT
The pricing issue has come to a head as Japan has ramped up
LNG imports after last year's devastating Fukushima crisis that
crippled the country's nuclear power sector.
Japan logged a second straight month of trade deficits in
August, partly due to an increase in its energy imports.
Changes to LNG pricing are inevitable, some producers say.
"It's difficult to sustain for a long time the argument that
I don't care about my customers," Jean-Marie Dauger, executive
vice-president of GDF Suez, told Reuters at the
conference. "If we don't adapt then the demand will diminish."
Another catalyst for change could be the development of new
markets for LNG in China and India, which are expected to become
the second and third largest LNG importers by 2020.
"If you want real volume to increase, it's going to come
from these countries -- developing countries and they would
definitely need, initially, some kind of breathing space," R.K.
Garg, the director of finance at India's Petronet said earlier
Some European utilities, such as Italian energy group Edison
and Germany's EON have both got amended terms on
Qatar, the world's biggest LNG producer, has the most to
lose from lower prices and has warned that pricing uncertainty
and volatility could discourage long-term investment.
But those concerns are being brushed aside in Asia, where
countries are racing to build their own hubs with Shanghai and
Singapore actively exploring options.
Singapore LNG is likely the most advanced and expected to
come online in 2013. Asian LNG Hub Co., which says it plans to
identify a site in South Korea this month and start feasibility
studies soon after, is aiming for completion by 2018.