Sept 21 (Reuters) - 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. For a related story:
Following is a selection of comments from participants at LNG Producer-Consumer Conference held in Tokyo on Wednesday. Comments came from speeches or abstracts of speeches compiled by the Japanese government.
”With the paradigm shift due to full-fledged production of shale gas, oil-linked indexing is starting to be less reasonable. If new suppliers from North America, Russia and Africa enter Asian markets in a few years, it will no longer be reasonable.
“At current price levels, the use of coal and nuclear power has to rise, which would hurt LNG demand for a long time. To come up with a new method to replace oil-linked indexing is an agenda that both producers and consumers have to tackle to stabilise global LNG demand/supply.”
The minister predicted that North American shale gas is unlikely to alter the current divide between the three main regional LNG markets and does not see global producers embracing future long-term supply contracts pricing delinked with oil.
“The success of the long-term LNG trade model is based on the balance between sellers and buyers with a paramount emphasis on reliability and performance. Securing future energy needs is dependent on the investments we make today. Making available future resources requires a stable investment environment. Uncertainty and volatility could, however, discourage long-term investment.”
MARTIN FERGUSON, AUSTRALIAN MINISTER FOR RESOURCES AND ENERGY
”(Australia) welcomes the increasing trend for LNG buyers to take equity stakes in projects as the best means of achieving long-term alignment throughout the supply chain.
“Greater cooperation in the Asia-Pacific market will be particularly important in managing the global gas price differential that is currently being driven by development of unconventional supplies for the U.S. domestic market.”
JOE OLIVER, CANADA‘S MINISTER OF NATURAL RESOURCES
”A key strategic objective for Canada is to diversify its energy markets, particularly to the Asia-Pacific region, where demand is increasing.
“Based on projects proposed, Canada could export the equivalent of 9 billion cubic feet per day of natural gas as LNG, or 66 million tonnes of LNG annually.”
HONG SUK-WOO, SOUTH KOREA‘S KNOWLEDGE ECONOMY MINISTER
“It is important that both producers and consumers exchange honest opinions on prices and contract varieties.”
“Currently, CPC is interested in entering into a U.S. Henry Hub gas-linked contract to improve CPC’s price competitiveness in LNG procurement since the crude oil price fluctuates all the time.”
“Global LNG demand will rise 4.5 percent per year during the 20 years from 2010 to 2030. Tight gas supply/demand will support European and Asian gas prices in future.”
“Japan’s LNG prices have deviated significantly from internationals norms. If this discrepancy continues, it will result in curbed natural gas consumption and conversion to other energy sources. Therefore, we aim to bring East Asia LNG prices into convergence with international standards by introducing the link to U.S. Henry Hub and European gas prices.”
“The gas pricing system in the three markets is no longer logical. European prices have started to reflect Henry Hub prices and the situation is changing. Russian gas has also moved to near the levels of Henry Hub.”
“Japan’s oil-link indexing is illogical. Even if it takes time setting up Asian markets, LNG prices should be linked to Hub prices.”
IEEJ proposed a new Asian price formula, introducing Henry Hub pricing as an element into oil-linked indexing.
“As a result of a decline in oil consumed for power generation, the competitive relationship of gas and oil has weakened and oil-linked indexing is no longer reasonable. It’s inappropriate to link to oil prices that are strongly swayed by financial markets.”
”Indonesia’s domestic gas demand is robust, and it is the new role for Pertamina to supply gas to domestic markets in addition to exports.
“The differential between Indonesia’s domestic gas prices and Henry Hub international prices will narrow gradually.”
”Our present LNG import capacity has exceeded 10 million tonnes per year (mtpa) and is set to rise to 53 mtpa in the next five years.
“India is making efforts to get Henry Hub linked LNG pricing. However, we do understand that suppliers have to be adequately incentivized to keep investments going into LNG facilities.” (Reporting by Osamu Tsukimori; Editing by Aaron Sheldrick and Himani Sarkar) (firstname.lastname@example.org, +813 6441 1857, Reuters Messaging: email@example.com)