r esources l aw i nternational apec lng trade current situation and future prospects march 2005...

RESOURCESLAW INTERNATIONAL

APEC LNG Trade

Current Situation and Future ProspectsMarch 2005

Robert Pritchard


Energy in APEC

One of 11 Working Groups

APEC Energy Ministers Meeting (EMM)Held every year or second year

APEC Energy Working Group (EWG)Government officials meet every 6 months

APEC EWG Business Network (EBN)Representatives meet the day prior to the EWG


Acceleration in World Gas Consumption

1975: 1.1 tcm

Natural Gas

10%

Other

energy

Natural Gas

21%

Other

energyOther

energy

Natural Gas

28%

2000: 2.3 tcm 2025: 5.1 tcm


APEC Gas Reserves

Country

Proved Reserves (tcm)

World Reserves

(%) Russia 47.00 26.7

United States 5.23 3.0

Indonesia 2.56 1.5

Australia 2.55 1.4

Malaysia 2.41 1.4

China 1.82 1.0

Canada 1.66 0.9

Brunei 0.35 0.2

Peru 0.25 0.1

Subtotal 9 APEC members 63.83 36.31

Subtotal 9 APEC members excluding Russia 16.83 9.57

TOTAL WORLD 175.78 100.0

Source: BP 2004 Statistical Review of World Energy

Iran, Qatar and Saudi Arabia hold another 34% of world reserves


APEC Gas Imbalance

Apec gas trade 2000 - bcm

184

100

3622

10 9

-2 -2 -3 -4 -6-19

-75

-100

Russia

Canada

Indonesia

Malaysia

Australia

Brunei

Thailand

Singapore

Mexico

Chile

Taiwan

Korea

Japan

USA

Gas Exports

Gas Imports

APEC Gas Trade 2000 - bcm (includes gas by pipeline)


A View from the USAConference assesses global energy security – Apr 27,2004

The conference was jointly sponsored by the Center for Strategic and International Studies (CSIS) and US-Saudi Business Council.

Greenspan said that the sharp increase in both crude and gas prices reflected "fears of long-term supply disruptions in the Middle East that have resulted in an increase in risk premiums being added to the cost of capital."

The Federal Reserve Board chairman said natural gas markets have been a long way coming. Little more than 50 years ago, he recalled, "drillers seeking valuable crude oil bemoaned the discovery of natural gas."

By 1970, however, gas consumption on a heat-equivalent basis had risen to three-fourths that of oil, Greenspan said.

Greenspan also sees significant global trade developing in natural gas markets because of cost reductions in liquefaction and transportation.

"High natural gas prices projected by distant futures prices have made imported gas a more attractive option," he said.


Major Natural Gas Trade Movements


Global Gas Trade Breakdown 2003

Source: BP Statistical Review 2003

bcm Share of exportsShare of globalconsumption

Domestic consumption 1967 76.0%

Pipeline exports 455 73% 17.5%

LNG exports 169 27% 6.5%

Subtotal exports 624 100% 24%

Total 2591 100%


Future Prospects

• Global gas trade will overtake oil by 2025• Global LNG trade will increase 5 times

between 2003 and 2030 (Shell)• APEC LNG trade currently US$20 billion p.a.• APEC LNG trade likely to be US$40 billion

p.a. by 2015• APEC LNG trade could increase to US$100

billion p.a. by 2025


Bottlenecks to Future Trade

• There is a crucial link between gas trade and investment

• There are impossible trade bottlenecks unless there is massive investment and market restructuring

• Governments expect the private sector to argue the case for the necessary reforms

- gas is not a commodity like oil


APEC Study

1. Greater use of natural gas is supported by APEC at the highest political level

• One of the solutions to the problem of

heightened energy insecurity.


2. Within APEC an abundance of stranded gas resources is waiting to be taken to markets

• By 2025, the trade value to APEC could

exceed $100 billion per annum.

APEC Study (contd)


APEC Study (contd)

3. There are great expectations of natural gas as the preferred “swing fuel” for the energy industry

• These expectations may be unrealistic due to trade and investment bottlenecks


4. Domestic gas markets in most APEC importing economies are immature and require to be created

• This is a major trade bottleneck

• An “industry vision” is required to guide each economy’s transition to a mature market

APEC Study (contd)


5. There is a paucity of gas transportation infrastructure in APEC economies

• This is a major investment bottleneck - US$10-15 billion per annum must be invested within APEC

APEC Study (contd)


APEC Study (contd)

6. Some communities and NGOs are expressing exaggerated safety fears about the siting of additional LNG import terminals

• There is a need to educate and inform communities of the outstanding 40 year safety record of LNG import terminals


APEC Study (contd)

7. There must be a unifying theme for the pursuit of APEC’s cross-border natural gas strategy

• The unifying theme is the goal of energy sustainability


APEC Study (contd)

8. A collaborative mechanism is recommended amongst governments, investors and communities.

• This should be part of a three-level best practice regime


Best Practice (1) INTERNATIONAL LEVEL

Institutionalized collaboration on sustainability goals, environmental standards, natural gas supply chains,

cross-border trade and investment facilitation, transparency, international trade, investment and

environmental regimes and other elements of “soft infrastructure”

ASIA-PACIFIC GAS (APGAS) FORUM

An initiative for the APEC EBN


Best Practice(2) INDIVIDUAL ECONOMY LEVEL

Trade and investment facilitation, industry vision, market creation, policy and regulatory harmonization, environmental enforcement and

transparency

MAIN APEC GAS EXPORTING ECONOMIES

MAIN APEC GAS IMPORTING ECONOMIES

Australia

Brunei

Canada

Indonesia

RussiaMalaysia

Japan

Thailand

ChinaChinese Taipei

Mexico

KoreaSingapore

United States


Best Practice

(3) INDIVIDUAL PROJECT LEVEL

“Total package project management”, environmental, commercial and financing issues, alignment of interests, transparency and contractual

best practice

Project 1

Project 2

Project 3


3 Complementary Levels(1) INTERNATIONAL LEVEL

Collaboration on sustainability goals, environmental standards, natural gas supply chains, cross-border trade and investment facilitation, transparency,

international trade, investment and environmental regimes and other elements of “soft infrastructure”

(3) INDIVIDUAL PROJECT LEVEL

“Total package project management”, environmental, commercial and financing issues, alignment of interests, transparency and contractual

best practice

(2) INDIVIDUAL ECONOMY LEVEL

Trade and investment facilitation, industry vision, market creation, policy and regulatory harmonization, environmental enforcement and

transparency+

+


APGAS

Asia-Pacific Gas Forum

• proposed by EBN

• will facilitate international best practice

• may be held in Perth in September 2005

r esources l aw i nternational apec lng trade current situation and future prospects march 2005...

Documents