The Asian Quest for LNG in a Globalising Market Maria van der Hoeven Executive Director, IEA 7 November, 2014 OECD/IEA 2013 ©©OECD/IEA 2014 Strong Asian demand will support global LNG trade 500 450 OECD Europe 30% 350 25% OECD Asia Oceania OECD Americas 300 20% Middle East 200 15% Latin America 150 10% China 5% Non-OECD Asia 0% China + nonOECD Asia 400 Bcm 35% 250 100 50 0 2013 2014 2015 2016 2017 2018 2019  Global LNG trade is set to expand by one-third to 450bcm by 2019, and likely to increase further.  Increase of global LNG trade will be supported by Asia, mostly by strong demand from China and non-OECD Asia. © OECD/IEA 2014 What is making the Asian gas price so high? 20 18 Henry hub 16 USD/MBtu 14 12 NBP 10 8 6 Asian LNG (average) 4 2 0 German border price  Wide price gap exists among major regional gas markets for several years.  Not only is it the fastest-growing gas market, Asia is even more attractive for producers because Asian buyers pay the highest prices.  Less tight LNG spot market once new LNG projects start in the near future. © OECD/IEA 2014 Trading hubs – An Asian-tailored solution? TAGP and LNG terminals in Southeast Asia  Southeast Asian countries are already interlinked by pipeline and plan to increase these linkages through Trans ASEAN Gas Pipeline (TAGP) and LNG. © OECD/IEA 2014 Henry Hub indexation in new contracts is not the only solution Relevance Asian hub indexation HH indexation Oil indexation Time  US Henry Hub reached as high as USD 8/Mbtu in early 2014, whereas Asian spot prices went down to below USD 11/Mbtu during this summer.  Longer term, a mix of oil, Henry Hub and Asian hub indexation could govern LNG contracts. © OECD/IEA 2014 Asian countries are looking for more competitive markets China  Unbundling and price reform are under way to tackle the issues related to a larger import dependency. India  There have been further attempts to change the pricing regime, although reform has not yet been undertaken. Japan  Electricity system reform progressing as well as discussion of gas system reform  Already launched new platform for LNG futures transaction Korea  State-controlled KOGAS efforting to reduce LNG import prices by teaming up with private companies as well as Japanese utility. Singapore  Already a liberalised market with LNG trading hub established, and waiting for its business expansion.  Many Asian countries are undertaking their own market reforms to enhance market efficiency as well as market competition. © OECD/IEA 2014 OECD/IEA 2013 ©©OECD/IEA 2014