01 March 2013 07:27 [Source: ICIS news]
SINGAPORE (ICIS)--Asia is expected to become the world’s second largest gas market after North America, by 2015, an official from the International Energy Agency (IEA) said on Friday.
“It is very clear that LNG [liquefied natural gas] will play an increasingly important role,” said Laszlo Varro, head of the gas, coal and power division at the IEA.
“Gas demand growth in the Asia-Pacific is considerably faster than in the US,” he said.
Varro was speaking at an event in Singapore to launch IEA’s report, “Developing a Natural Gas Trading Hub in Asia”.
Natural gas has the potential to improve energy security and yield economic and environmental benefits in Asia, but its role in the region will depend considerably on how the pricing of natural gas is tied to the fundamentals of supply and demand in the region, the agency said in the report.
The market for natural gas in Asia is dominated by long-term contracts in which the price of gas is linked, or indexed, to that of oil, it said.
However, this has helped keep Asian gas prices much higher than those in other parts of the world, the agency said.
Governments in Asia will have to adopt a hands-off approach if they want to encourage the move to a competitive natural gas trading hub, “something that the IEA acknowledges is challenging due to governmental efforts to safeguard energy security”.
They will also need to ensure “price deregulation at the wholesale level, sufficient network capacity and non-discriminatory access, a competitive number of market participants, and the involvement of financial institutions”, it said.
The gas market in Asia is currently constrained by the lack of both a trading hub to facilitate the exchange of natural gas, and the development of a “transparent price signal to direct investments in natural gas infrastructure”, the IEA added.
Singapore now seems to be best-placed to be a regional gas trading hub, according to Varro.
“It is of course already a globally important hub of oil trading, and some of its broader strengths, including its good location and supportive legal environment, will be applicable for LNG trading as well,” he added.
Singapore LNG Corp’s new terminal is expected to receive its first LNG shipment from Qatargas in the second quarter of this year.
“We have seen a steady growth in the presence of major trading houses and industry players such as Shell, BP and Gazprom among others, who are interested to use Singapore as a hub for their business in the region,” said Chee Hong Tat, CEO of Singapore’s Energy Market Authority (EMA).
“Shell for example, has decided to locate their global gas operations in Singapore. EMA welcomes these developments and we look forward to working with our industry partners to grow their LNG-related activities,” Chee added.
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