The establishment of an Asian regional gas trading hub is still at least five years away, International Gas Union President Jerome Ferrier told a press conference in Sydney Tuesday.
LNG importers in Asia are studying plans to establish a regional gas trading hub, similar to the US' Henry Hub or the UK's National Balancing Point.
The hub would be a "virtual point, onshore, connected with gas lines ... with gas storages and pipelines and so on, and with a very mature market," Ferrier said.
But how and where an Asian gas hub would be implemented is still uncertain. Ferrier said Japan was too isolated, Singapore has no pipeline connections, and the market in China was still in early stages of development.
"It will take time to implement [the hub]," Ferrier said. "The main import companies are thinking that with an Asian gas hub the price will drop maybe. But we need time to find the right point and to find a good equilibrium between the long-term contracts, because we need long-term contracts between suppliers and consumers to develop new infrastructure, and the gas spot [market], which is not all the time at a better price."
Ferrier added that it would also take time for the LNG consuming nations to agree on whether the reference price would be in Singapore, Hong Kong, Shanghai or Tokyo.
Meanwhile, Ferrier forecast that China's consumption of LNG would match that of Japan in five years. China imported a record 18 million mt of LNG in 2013, up 22.7% from 2012, while Japan's imports rose 0.2% to a record 87.49 million mt, Platts has reported previously.
"About a third of the total increase in world gas consumption is coming from the Asia Pacific region, and China, Japan, South Korea and India are the main consumers," Ferrier said.
"China and India have important environmental targets to meet and natural gas is going to be the substitute for oil and coal in this regard," he added. "Increased natural gas consumption will also assist the energy security of the region as it embraces a greater reliance on gas while its constituents grapple with the issue of more or less nuclear power as a base load energy source."
Asia Pacific already accounts for around two thirds of the world's total LNG imports. The IGU expects gas imports into the region in the form of LNG and via pipeline to continue to rise and Australia is well placed to meet some of that growing demand, Ferrier said.
Seven new LNG projects with total capacity of just over 60 million mt/year are currently under construction around Australia. The new capacity will boost Australia ahead of Qatar as the world's largest producer by around 2017, with output of just under 90 million mt/year.
IGU Vice President David Carroll estimated that of the six US LNG export facilities that have so far been approved by the Department of Energy to ship to non-free trade agreement countries, one or two would come online in the next five years.
He added that at Henry Hub-based gas prices plus liquefaction and transportation costs of around $6/MMBtu, US LNG would be competitive with that of Australian and other exports. Even so, the US is only expected to be exporting around 10% of its production over the coming five to 10 years, Carroll said.
