By OGJ editors
BARCELONA, Apr. 25 -- Balance evolving between LNG producers and consumers by 2010 will make markets in China and India much more viable than in recent years.
That was the message of Graham Hartnell and Mostefa Ouki, of Nexant, London, in an analysis of Asia's two economic powerhouses in a presentation to the 15th Conference & Exhibition on LNG in Barcelona Apr. 25.
Emerging gas markets in China and India face similar obstacles: low and controlled natural gas prices, dominance of coal, and lack of gas infrastructure. "They are also subject to the vagaries of developments in international gas markets," said Hartnell and Ouki.
While gas activities are mostly under government control in both countries, China's government is more active in gas-industry development than is India's. In both countries, market penetration has slowed recently, mainly in power generation and in regions where gas and coal compete.
Some potential exists for gas-use development in industrial and urban-distribution projects. Development there will "depend on the size of these markets and gas price affordability," the speakers said.
But Chinese and Indian users have recently begun to adjust their gas-price expectations, with an increase in gas prices a consequence in both countries. There may be a difficult transition, but in the medium to long term, gas prices will "converge towards market-determined prices set by an optimal combination of indigenous and importing gas supplies," reflecting the price of gas relative to competing fuels.
Hartnell and Ouki said gas infrastructure developments in both countries are closely linked to development of viable sources of gas supplies, "whether these are indigenous, cross-border supplies, or LNG." They cautioned that gas infrastructure development involves "large capital-intensive projects that require viable long-term commitments on both the supply and demand sides and an adequate gas regulatory framework."
Near term, LNG exporters may be more interested in supplying other clients in Asia-Pacific and in the Atlantic Basin, "where they can obtain better price netbacks."
By 2010 or so, the completion and start-up of several LNG project—new and expansions—in Qatar, Australia, and Africa, will change market dynamics, lead to a more-balanced market for LNG, and make China and India's gas markets difficult to ignore.
