Japan and Europe to co-operate on LNG market
28 May 2013 17:15 GMT
London, 28 May (Argus) — Japan’s ministry of economy, trade and industry (Meti) and the European Commission’s directorate-general for energy are to co-operate on developing a liquid global gas market in light of recent developments including the US shale boom and the Fukushima nuclear meltdown.
Japan’s LNG import bill has soared over the past two years after the shutdown of most of the country’s nuclear fleet. This resulted in significantly higher gas imports to offset lost atomic generation. Japan also imports LNG on prices linked with crude, which have stayed high, while European gas prices have either stayed relatively flat in comparison and US gas prices have fallen because of soaring shale gas production.
At the same time, rising Japanese LNG consumption has had significant ramifications for Europe, restoring some of the region’s previous dependence on its major suppliers of pipeline gas, which had weakened from late 2008 to early 2011. Moreover, Europe has been looking to the LNG markets as one of its options to offset declining indigenous production over the longer term.
“As major gas importers, Japan and the EU share the need for the development of a transparent and liquid global gas market driven by supply and demand fundamentals, while maintaining secure and stable supply,” the EU said, adding that the two parties will meet in June.
“This co-operation aims at sharing respective views and analysis on the changes in recent years, including the shale gas revolution in North America, rising gas demand in Asia and divergence in gas prices in regional markets, assessing how the markets should ideally function, and discussing ways government could support the transition towards liquid and flexible global gas markets.”
Since Fukushima, Japan has been calling for alternatives to oil-linked LNG, eyeing US LNG exports as an alternative. New US LNG export contract prices have been linked to the US Henry Hub gas prices rather than crude, and the recent second project in Freeport, Texas, to receive US government export approval suggests that more liquefaction facilities will be green-lighted.
The average Japanese LNG price in 2012 was $16.59/mn Btu compared with $10.78/mn Btu in 2010, before the March 2011 earthquake and tsunami. Imports have also increased by 23.8pc to 86.88mn t over the same time period.
Other Asia-Pacific countries including China, India, Thailand, Singapore and Malaysia have commissioned new import terminals over the past few years, which is expected to drive up regional LNG demand.