JAPAN TO KEEP ROLE AS WORLD'S BIGGEST CUSTOMER FOR LNG

Japan will retain its title as the world's No. 1 consumer of liquefied natural gas for the next 20 years, the July issue of Geopolitics of Energy says.

That's because Japan must have most of its gas supply brought in by tanker, the monthly publication of Conant & Associates Ltd., Washington, D.C., points out.

Meanwhile, the U.S. LNG market will remain stagnant through 2010, and Europe's may even decline. Both of those regions will depend more on domestic gas resources and on pipelines.

Overall, the volumes of internationally traded gas moved through pipelines will far exceed those shipped as LNG by tanker because the U.S. and Europe hold reserves of their own or have access to transborder gas pipelines.

Japan, however, receives about 70% of the world's LNG exports and uses half of the world's LNG tankers. Geopolitics of Energy says it is unlikely Japan will greatly reduce its share because there are no major gas reserves in East Asia.

In fact, Korea, Taiwan, and China are also likely to increase their shares of global LNG consumption, although to a lesser extent. By 2000, Asian demand is expected to total 56.2 million tons/year, World Gas Intelligence reports, but only 38.2 million tons/year are on order or planned.

Japan is forecast to demand 57 million tons/year of LNG by 2010. Korea, Taiwan, and China could require a total 75 million tons/year by then.

LNG SOURCES

Although Indonesia, Malaysia, and Brunei are likely to remain Japan's largest sources for LNG, Australia is making a big push to step up its exports.

Australia has spent $14 billion (Australian) on a project to make gas exports the country's major hard currency source in the 1990s. It will have seven LNG carriers shipping to eight Japanese utilities, with intent to meet 15% of those companies' requirements by the mid-1990s.

LNG from the Yukon Pacific project proposed to tap Alaska's North Slope gas is deemed a comparatively expensive source, and supply is still uncertain, Geopolitics of Energy said. Japan may "reluctantly" agree, however, to accept deliveries of North Slope LNG out of deference to U.S. concerns about its trade deficit.

Other Japanese supplies will come from more distant sources such as Abu Dhabi and Qatar.

Tokyo's persistent, wide ranging search for gas sources stems from the costliness of the LNG industry. It is a risky business, Geopolitics of Energy says, and could become much riskier if LNG evolves into another spot trade.

"But the risks are less with Japan, which is likely to calculate its needs carefully and maintain competition between sources."

U.S., EUROPEAN DEMAND

It is doubtful that LNG imports by the U.S. will play a much more important role in the next 2 decades. If supply and demand forecasts are not off by more than 1-2 tcf, the U.S. will need no more LNG than its present terminal capacity of 800 MMcfd, or about 3-4% of total gas demand.

The reason, Geopolitics of Energy said, is that the U.S. gets at least 80% of its gas supplies from domestic sources and almost all of the rest from Canada via trans border pipelines.

Europe, with large gas reserves of its own, is close to huge Soviet reserves and to potential supplies in the Middle East, also deliverable by pipeline. In addition, seabed pipelines developed by Algeria, Italy, and France will increase the efficiency of gas supplies from North Africa and eventually the Middle East. Seabed pipelines, says Geopolitics of Energy, may have permanently changed the logistics of gas trade in Europe.

"It is conceivable that after the next several decades, LNG to Europe may be only a memory, as pipelines connect the continent to oil suppliers, especially to those in the Persian Gulf."