Southeast Asia’s hunger for LNG gives Qatar a boost

Reading Time: 3 minutes

Not unimportant to the Qatari economy is the fact that future streams of liquefied natural gas, or LNG, around the world will flow heavily in the direction of Southeast Asia. Demand from the emerging nations in this region will drive overall Asian LNG demand through 2025. Represented predominately by Indonesia, Thailand, Malaysia and Singapore, the region will account for one-third of that demand growth, increasing 45 million tonnes annually, according to latest industry reports.

By Arno Maierbrugger

Thailand and Indonesia will be the biggest absorber of LNG and have in the past been making sizable investments in developing their LNG infrastructure. For example, Thailand has beefed up its facilities at its southern industrial zone of Map Ta Phut to receive larger numbers of LNG from Qatar after Thailand’s oil and gas giant PTT Plc signed an agreement with Qatargas to buy LNG over 20 years at an annual volume of 2 million tonnes, with the first delivery set for January 2015, both companies announced in December 2012.

Qatargas, on that occasion, said it sees Thailand as an evolving LNG market and recognises its potential within Southeast Asia to absorb significant quantities of LNG in the future. Thailand’s gas demand under the third revision of the Power Development Plan between 2010-2013 looks set to grow across the board in the power, industrial, petrochemical and transport sectors. This would require Thailand to import more LNG in the future and to expand the LNG receiving terminal’s capacity from 5 to 10 million tonnes a year, which is now planned for completion in 2017. In Thailand, higher gas demand is also driven by policy decisions in the power sector that will limit the scope for coal-fired electric power generation and result in increasing reliance on gas-fired electric power plants. This will most likely drive LNG demand in Thailand after 2020 when indigenous gas and pipeline imports will be unable to meet demand.

Indonesia, on the other hand, is itself a sizeable producer of LNG but has said that it will seek to import overseas cargoes to meet growing domestic demand and at the same time maintain is export commitments. Indonesia, second only to Qatar in worldwide LNG sales, is boosting gas production and usage to compensate for declining crude output which led the nation to exit the Organisation of Petroleum Exporting Countries in 2008. Indonesia supplies about 56 per cent of gas to local buyers as the government boosts its use in industries, transportation and power generation. By importing and re-exporting LNG, Indonesia is trying to balance its LNG revenues international as gas prices as LNG cargoes are more expensive than domestic supply.

Overall, estimations of the industry are that total Southeast Asian LNG demand will hit 47 million metric tonnes per year by 2025, an increase of a whopping 45 million metric tonnes from current demand levels of 2 million metric tonnes. This would surpass Indian LNG demand, which would be 34 million metric tonnes by 2025. Furthermore, total Asian LNG demand by 2025 could reach 140 million metric tonnes.

For Qatar, these developments are very significant as the country is targeting the heavy growth markets of Asia to offset diminishing LNG demand in the West, with the US pushing for gas self-sufficiency and European economies stagnating. The deliveries to Thailand will be accompanied with Qatar’s first-ever shipment to Singapore in the first quarter of 2013, which will be used to commission Singapore LNG Corporation’s first importation terminal. Also, first LNG shipments from Qatar to Malaysia will start in 2013 at a volume of 1.5 million tonnes annually for at least 20 years as per an agreement between Qatargas and Malaysia’s Petronas LNG Ltd.

It is highly likely that more deals for Qatar in Southeast Asia will follow suit and Qatargas’ export share to Asia-Pacific of currently 47 per cent will shift significantly upwards. Qatar has also been in talks with Vietnam to deliver LNG starting from 2013 either directly or later through the Trans-ASEAN Gas Pipeline via neighbouring countries after it will be operational. And even the Philippines has said that it will join other ASEAN nations in exploring the opportunity of importing LNG to meet the strongly rising demand of its rapidly growing economy, a demand that cannot be absorbed through other means of energy production.

With LNG production being the cornerstone of Qatar’s economy, the reorientation of global exports is essential to the government’s spending plans. Southeast Asia is the destination of choice, as coal – having been the conventional fuel in the region for a long time – is losing shares in the power mix, and natural gas has an opportunity to seize an increased role in the market as environmental concerns are increasing.

 

This comment is one of Inside Investor’s monthly contribution to Qatar’s leading business magazine Qatar Today.

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Reading Time: 3 minutes

Not unimportant to the Qatari economy is the fact that future streams of liquefied natural gas, or LNG, around the world will flow heavily in the direction of Southeast Asia. Demand from the emerging nations in this region will drive overall Asian LNG demand through 2025. Represented predominately by Indonesia, Thailand, Malaysia and Singapore, the region will account for one-third of that demand growth, increasing 45 million tonnes annually, according to latest industry reports.

Reading Time: 3 minutes

Not unimportant to the Qatari economy is the fact that future streams of liquefied natural gas, or LNG, around the world will flow heavily in the direction of Southeast Asia. Demand from the emerging nations in this region will drive overall Asian LNG demand through 2025. Represented predominately by Indonesia, Thailand, Malaysia and Singapore, the region will account for one-third of that demand growth, increasing 45 million tonnes annually, according to latest industry reports.

By Arno Maierbrugger

Thailand and Indonesia will be the biggest absorber of LNG and have in the past been making sizable investments in developing their LNG infrastructure. For example, Thailand has beefed up its facilities at its southern industrial zone of Map Ta Phut to receive larger numbers of LNG from Qatar after Thailand’s oil and gas giant PTT Plc signed an agreement with Qatargas to buy LNG over 20 years at an annual volume of 2 million tonnes, with the first delivery set for January 2015, both companies announced in December 2012.

Qatargas, on that occasion, said it sees Thailand as an evolving LNG market and recognises its potential within Southeast Asia to absorb significant quantities of LNG in the future. Thailand’s gas demand under the third revision of the Power Development Plan between 2010-2013 looks set to grow across the board in the power, industrial, petrochemical and transport sectors. This would require Thailand to import more LNG in the future and to expand the LNG receiving terminal’s capacity from 5 to 10 million tonnes a year, which is now planned for completion in 2017. In Thailand, higher gas demand is also driven by policy decisions in the power sector that will limit the scope for coal-fired electric power generation and result in increasing reliance on gas-fired electric power plants. This will most likely drive LNG demand in Thailand after 2020 when indigenous gas and pipeline imports will be unable to meet demand.

Indonesia, on the other hand, is itself a sizeable producer of LNG but has said that it will seek to import overseas cargoes to meet growing domestic demand and at the same time maintain is export commitments. Indonesia, second only to Qatar in worldwide LNG sales, is boosting gas production and usage to compensate for declining crude output which led the nation to exit the Organisation of Petroleum Exporting Countries in 2008. Indonesia supplies about 56 per cent of gas to local buyers as the government boosts its use in industries, transportation and power generation. By importing and re-exporting LNG, Indonesia is trying to balance its LNG revenues international as gas prices as LNG cargoes are more expensive than domestic supply.

Overall, estimations of the industry are that total Southeast Asian LNG demand will hit 47 million metric tonnes per year by 2025, an increase of a whopping 45 million metric tonnes from current demand levels of 2 million metric tonnes. This would surpass Indian LNG demand, which would be 34 million metric tonnes by 2025. Furthermore, total Asian LNG demand by 2025 could reach 140 million metric tonnes.

For Qatar, these developments are very significant as the country is targeting the heavy growth markets of Asia to offset diminishing LNG demand in the West, with the US pushing for gas self-sufficiency and European economies stagnating. The deliveries to Thailand will be accompanied with Qatar’s first-ever shipment to Singapore in the first quarter of 2013, which will be used to commission Singapore LNG Corporation’s first importation terminal. Also, first LNG shipments from Qatar to Malaysia will start in 2013 at a volume of 1.5 million tonnes annually for at least 20 years as per an agreement between Qatargas and Malaysia’s Petronas LNG Ltd.

It is highly likely that more deals for Qatar in Southeast Asia will follow suit and Qatargas’ export share to Asia-Pacific of currently 47 per cent will shift significantly upwards. Qatar has also been in talks with Vietnam to deliver LNG starting from 2013 either directly or later through the Trans-ASEAN Gas Pipeline via neighbouring countries after it will be operational. And even the Philippines has said that it will join other ASEAN nations in exploring the opportunity of importing LNG to meet the strongly rising demand of its rapidly growing economy, a demand that cannot be absorbed through other means of energy production.

With LNG production being the cornerstone of Qatar’s economy, the reorientation of global exports is essential to the government’s spending plans. Southeast Asia is the destination of choice, as coal – having been the conventional fuel in the region for a long time – is losing shares in the power mix, and natural gas has an opportunity to seize an increased role in the market as environmental concerns are increasing.

 

This comment is one of Inside Investor’s monthly contribution to Qatar’s leading business magazine Qatar Today.

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