Sign in Sign up
Quick Navigation
Exhibition News position:Home > Media > Exhibition News

Emerging opportunities for LNG in Asia: part two

Source:本站Final update:2017-12-26 09:17:09 Author:佚名 Browse:893second

Richard Mortimer, Arup, Hong Kong, explores how LNG is becoming the fuel of choice across Asia as energy demand increases rapidly.

Diverse opportunities

While LNG-to-power remains the most significant demand in the Asia region, there are other applications for LNG hubs – such as break bulking and bunkering. Singapore is looking to set itself up as a regional hub for LNG trading using on-shore receiving tanks. It will typically receive large cargoes from LNG suppliers in countries such as Australia or Qatar, and then reload the LNG onto smaller vessels to distribute to smaller regional markets. By breaking down large shipments in this way, the hub will benefit from economies of scale in supply while charging a premium to the regional users for smaller loads. The regional users will also benefit because they would have had to pay a much larger premium to get one of the LNG suppliers to supply them directly with a much smaller cargo than they would typically handle.

The provision of strategically placed bunkering facilities offers another opportunity in the shipping industry’s move to reduce carbon emissions. Replacing the current heavy fuel oil engines with LNG engines would make a major contribution to reducing carbon emissions and some cargo and passenger ships are already running dual-fuel systems. The lack of such facilities and supporting infrastructure is presently holding back the progress of their development and popularity. There is potential for LNG terminals to provide bunkering facilities across Asia and even worldwide. With more options for refuelling, more ships would be likely to convert to LNG – creating more demand.

Our recent work at Arup has included AALNG’s proposed terminal in Probolinggo, Indonesia, which is ideally suited to refuelling vessels. The proposed terminal will use a LNG carrier conversion as a FSRU sited on a 2.5 km jetty. It will have multiple purposes, including gas supply to the region, break bulking and bunkering.

Market challenges

There are certainly challenges on the horizon for the LNG market in Asia. The supply of LNG carriers for transportation, or conversion to floating storage, is limited – as is the supply of shipbuilding companies. But for the moment there remains plenty of potential for FSRU growth.

Overall, it is new markets – such as the Philippines and Indonesia – that will fuel future growth in LNG. While growth in traditional markets such as Japan has been stagnant and indeed is even expected to decline over the next two years, other emerging Asian LNG consumers are seeing imported volumes of LNG growing at over 20% year-on-year e.g. China’s LNG imports in January 2017 were almost 40% higher than in January 2016. As more regional LNG import facilities are constructed and commissioned in the Asia region, this increased demand will start to counteract the short-term surplus currently affecting the market.

That leaves the question of how to secure long-term demand. To address this challenge, major LNG producers such as Shell are looking at an integrated model. Instead of simply supplying LNG, they will work with partners to build a receiving terminal or FSRU together with an onshore gas-to-power plant that will then provide them with decades of demand for their LNG.

Until now, another challenge has been the liquidity of the market. Traditional importers like Japan have often been tied into offtake agreements lasting decades, with destination clauses stipulating where the LNG must be delivered. But the Japanese government has now said destination clauses are anti-competitive. This has opened the door for established offtakers like Japan, whose domestic demand is plateauing as more nuclear facilities are being brought back online, to negotiate for the LNG they were locked into purchasing to be resupplied directly into a market where demand is increasing, such as the Philippines.

Effectively, buyers can still honour the long-term contract even though their own demand has changed by supplying the LNG they are committed to taking into another market. In the current buyers’ market, they have been able to successfully renegotiate these clauses. This is creating a new dynamic in the market that was previously prevented by the highly restrictive destination clauses, and opening up opportunities for them to trade LNG with new receiving facilities in places such as the Philippines.

Taking advantage of such opportunities could be harder where power companies are state-owned. Government organisations may be slower to move, particularly where there is political deadlock, and the market will undoubtedly be slower to evolve in these countries.

In other cases more opportunities for LNG are being created by government policies. For example, South Korea has announced that it will stop building nuclear plants. Will it look to LNG to plug the gap in energy supply? And will it be able to act quickly enough to get more generation online? These questions are yet to be answered.

Global investments from Asia

Whatever the challenges, there are undoubtedly exciting opportunities for LNG in Asia today. Not least is the chance the region has to lead the world in LNG. We’re already supporting LNG projects globally from Asia and expect this trend to continue as investment reaches an all-time high.

Recommend Exhibitors
  • Contact Us
  • |
  • Site Map
  • |
  • Privacy and Disclaimer
  • |
  • Traffic
  • |
  • IPR     
  • |