APEC LNG Trade

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APEC LNG Trade

• Current Situation and Future Prospects
• March 2005
• Robert Pritchard

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Energy in APECOne of 11 Working Groups
APEC Energy Ministers Meeting (EMM) Held every
year or second year
APEC Energy Working Group (EWG) Government
officials meet every 6 months
APEC EWG Business Network (EBN) Representatives
meet the day prior to the EWG
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Acceleration in World Gas Consumption
Natural Gas 28
Natural Gas 10
Natural Gas 21
Other energy
Other energy
Other energy
1975 1.1 tcm
2000 2.3 tcm
2025 5.1 tcm

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APEC Gas Reserves
Source BP 2004 Statistical Review of World
Energy
Iran, Qatar and Saudi Arabia hold another 34 of
world reserves
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APEC Gas Imbalance
APEC Gas Trade 2000 - bcm (includes gas by
pipeline)
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A View from the USA
Conference assesses global energy security Apr
27,2004
The conference was jointly sponsored by the
Center for Strategic and International Studies
(CSIS) and US-Saudi Business Council.
Greenspan said that the sharp increase in both
crude and gas prices reflected "fears of
long-term supply disruptions in the Middle East
that have resulted in an increase in risk
premiums being added to the cost of capital."
The Federal Reserve Board chairman said natural
gas markets have been a long way coming. Little
more than 50 years ago, he recalled, "drillers
seeking valuable crude oil bemoaned the discovery
of natural gas." By 1970, however, gas
consumption on a heat-equivalent basis had risen
to three-fourths that of oil, Greenspan said.
Greenspan also sees significant global trade
developing in natural gas markets because of cost
reductions in liquefaction and transportation.
"High natural gas prices projected by distant
futures prices have made imported gas a more
attractive option," he said.
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Major Natural Gas Trade Movements
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Global Gas Trade Breakdown 2003
Source BP Statistical Review 2003
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Future Prospects

• Global gas trade will overtake oil by 2025
• Global LNG trade will increase 5 times between
  2003 and 2030 (Shell)
• APEC LNG trade currently US20 billion p.a.
• APEC LNG trade likely to be US40 billion p.a. by
  2015
• APEC LNG trade could increase to US100 billion
  p.a. by 2025

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Bottlenecks to Future Trade

• There is a crucial link between gas trade and
  investment

• - gas is not a commodity like oil

• There are impossible trade bottlenecks unless
  there is massive investment and market
  restructuring
• Governments expect the private sector to argue
  the case for the necessary reforms

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APEC Study

• Greater use of natural gas is supported by APEC
  at the highest political level
• One of the solutions to the problem of heightened
  energy insecurity.

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APEC Study (contd)

• Within APEC an abundance of stranded gas
  resources is waiting to be taken to markets
• By 2025, the trade value to APEC could exceed
  100 billion per annum.

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APEC Study (contd)

• There are great expectations of natural gas as
  the preferred swing fuel for the energy
  industry
• These expectations may be unrealistic due to
  trade and investment bottlenecks

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APEC Study (contd)

• Domestic gas markets in most APEC importing
  economies are immature and require to be created
• This is a major trade bottleneck
• An industry vision is required to guide each
  economys transition to a mature market

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APEC Study (contd)

• There is a paucity of gas transportation
  infrastructure in APEC economies
• This is a major investment bottleneck - US10-15
  billion per annum must be invested within APEC

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APEC Study (contd)

• Some communities and NGOs are expressing
  exaggerated safety fears about the siting of
  additional LNG import terminals
• There is a need to educate and inform communities
  of the outstanding 40 year safety record of LNG
  import terminals

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APEC Study (contd)

• 7. There must be a unifying theme for the pursuit
  of APECs cross-border natural gas strategy
• The unifying theme is the goal of energy
  sustainability

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APEC Study (contd)

• 8. A collaborative mechanism is recommended
  amongst governments, investors and communities.
• This should be part of a three-level best
  practice regime

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Best Practice
(1) INTERNATIONAL LEVEL Institutionalized
collaboration on sustainability goals,
environmental standards, natural gas supply
chains, cross-border trade and investment
facilitation, transparency, international trade,
investment and environmental regimes and other
elements of soft infrastructure
ASIA-PACIFIC GAS (APGAS) FORUM
An initiative for the APEC EBN
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Best Practice
(2) INDIVIDUAL ECONOMY LEVEL Trade and
investment facilitation, industry vision, market
creation, policy and regulatory harmonization,
environmental enforcement and transparency
MAIN APEC GAS IMPORTING ECONOMIES
MAIN APEC GAS EXPORTING ECONOMIES
Brunei
China
Australia
Thailand
Chinese Taipei
Indonesia
Japan
Singapore
Malaysia
Korea
Russia
Canada
Mexico
United States
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Best Practice
(3) INDIVIDUAL PROJECT LEVEL Total package
project management, environmental, commercial
and financing issues, alignment of interests,
transparency and contractual best practice
Project 1
Project 2
Project 3
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3 Complementary Levels
(1) INTERNATIONAL LEVEL Collaboration on
sustainability goals, environmental standards,
natural gas supply chains, cross-border trade and
investment facilitation, transparency,
international trade, investment and environmental
regimes and other elements of soft
infrastructure
(2) INDIVIDUAL ECONOMY LEVEL Trade and
investment facilitation, industry vision, market
creation, policy and regulatory harmonization,
environmental enforcement and transparency

(3) INDIVIDUAL PROJECT LEVEL Total package
project management, environmental, commercial
and financing issues, alignment of interests,
transparency and contractual best practice

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APGAS Asia-Pacific Gas Forum

• proposed by EBN
• will facilitate international best practice
• may be held in Perth in September 2005