Interview with Uniper: The main characteristics of Asia-Pacific’s energy trading patterns
In this interview with David Morris, Lead LNG Originator at Asia Uniper Global Commodities, we discuss the balance of energy trading in Asia.
Gastech News: How will recent developments in the global LNG industry affect the balance of energy trading in Asia?
David Morris: With the onset of new production in Australia and the start-up of the first US trains people are saying that we are already in a Buyer’s market and that this market looks likely to continue in the coming years. There is a strong prospect of a weak market and that’s without Angola and Yemen production and before the vast majority of US volumes come on line. There does not appear to be too much in the way of additional demand from the major Asian buyers but the low prices seem to be encouraging new demand to come on in places such as the Middle East and the Indian sub-continent. As a major European consumer, Uniper is also monitoring the potential for spill-over of surplus LNG into the European market and, after 6 or so years where Asian buyers have been prepared to outbid those in Europe, we get the feeling that things are going to change.
Gastech News: What are the main characteristics of Asia-Pacific’s energy trading patterns?
David Morris: Contrary to the last few years, there appears to be a push from east to west. Whether that is new Australian production coming on or Qatari volumes coming to the end of their post-Fukushima interim contracts and not being replaced, the trend is for volumes in Asia Pacific to move into the Middle East and India thereby pushing volumes into Europe. Having said that, once this market settles down we could be in for a period of stagnation in the global trade and the development of separate, but connected, Pacific- and Atlantic-basin markets.
Things to look out for longer term within Asia-Pacific are:
- The emergence of global purchasing alliances
- How the Japanese power and gas companies will deal with greater competition alongside fewer opportunities to pass costs through to end customers
- The potential for the break-up of the KOGAS import “monopoly”
- How quickly new demand can be encouraged on stream on the back of low prices and easier FSRU infrastructure
Gastech News: What is the outlook for the further usage of natural gas in Asia?
David Morris: I think as global citizens we were all encouraged by the move that the Chinese and US governments recently made to ratify their respective countries’ commitments to COP21. Overall, gas should be the energy source of choice for many Asian countries going forwards but it is not without its difficulties. You only have to look at the emerging nations of the Philippines and Indonesia to see this. Both have surging economies with a bulging demand but both are still favouring low-cost coal-fired generation over gas in order to keep their industrial output competitive compared to their near-neighbours. Gas might be the longer term solution but it is still some way away in certain cases.
We are also seeing the development of new technologies which will help consumers switch to using natural gas. In particular, the switch to LNG bunkering within Asia and small-scale power station use could both lead to an increase in demand going forwards.
Gastech News: As you will be presenting at the upcoming Gas Asia Summit in Singapore, 26-28 October, what are you most looking forward to discuss at the conference and what is your final message to our readers?
David Morris: I am very much looking forward to hearing what others feel about the changes that our industry is going through, finding out from others whether we are in for a period of sustained low prices and what, if anything, will get us out of the current glut.
In terms of a final personal message, I would say continue to monitor the US. Perhaps US LNG will continue to be the game changer it has already been labelled with. We could be heading towards a new period in the LNG market where further US projects deliver fresh volumes to fill any demand gap quicker, easier and at lower price thresholds than the mega-projects of before.
David Morris will be participating in a panel discussion on “Trading, Origination & Pricing Updates: LNG as the New Global Commodity?” at the upcoming Gas Asia Summit & Exhibition (GAS) which returns in its 4th edition to the Marina Bay Sands in Singapore from 26 to 28 October 2016. Book your delegate place and join over 300 international & regional c-level executives, decision makers & technology providers to discuss the dynamics that are revolutionising the Asian gas market today.
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