LNG pricing change needed

March 24:


Pricing problems: Senior ministers address gas price problems at Gastech 2014

Asian liquefied natural gas importers need changes to the pricing structure of natural gas and LNG if the region is to take full advantage of the “golden age of gas”, senior Korean officials told the Gastech 2014 VIP programme.

The natural gas revolution is “being hampered and threatened by the current structural inflexibility of the global natural gas market,” Korean vice minister of trade, industry and energy Han Jin-hyun said.

“The inflexible contract conditions and price decisions have created an Asian price premium that has prevented Northeast Asia from enjoying the full benefits of new developments in the gas market,” Han said.

“The gas industry revolution could become an empty slogan, which is not desirable for any of us, if such restrictions keep any region from reaching its full potential for growth,” he added.

Korea is the world’s second largest importer of LNG.

Han called for the reworking of the oil indexation price mechanism, “which is still being used even though there is no longer a connection between oil and gas prices”.

Jang Seok-hye, Korean Gas chief executive, also raised the issue of the Asian gas price premium in his address saying that it “has been there since natural gas trading began in Asia”.

“There are times that the old ways don’t work anymore. We need to get rid of the old and find new and better alternatives.”

Japan and South Korea are the world's number one and two LNG importers while Taiwan, China, India, Singapore and Thailand also receive large volumes.

These nations, plus Malaysia, Indonesia and possibly the Philippines are expected to drive Asian LNG demand growth.

An extra 80 million tonnes per annum of LNG will be required for Asian customers at the end of the decade, based on a 5% compound annual growth rate, according to Lin Sheng-Chung, chairman of Taiwan's CPC Corporation.

Source: http://www.upstreamonline.com/live/article1356029.ece?