SE Asia LNG Demand Growth to Far Outstrip India’s
Liquefied Natural Gas (LNG) suppliers looking to sell into Asia should increase their focus on the combined South East (SE) Asian markets - predominantly Indonesia, Thailand, Malaysia and Singapore - as the LNG appetite of these markets increase, Wood Mackenzie says in a report published Wednesday. Meanwhile, India, while offering an attractive LNG market opportunity, may not be of the scale many hope.
The combined SE Asian LNG markets will account for a third of overall Asian LNG demand growth by 2025, growing by 45 million tonnes per annum (mmtpa). However, the rate of India's LNG market growth may not be as sizeable as once thought, growing by 20 mmtpa within this timeframe.
Wood Mackenzie's Senior Gas Market Analyst, Nicholas Browne, says "Recent developments in Indonesia and Thailand have helped strengthen the outlook for very strong SE Asian LNG demand growth. In India, we are now seeing faltering domestic gas production and this is expected to limit the development of the gas market. Perhaps counter-intuitively to some, reduced gas production will also lower the rate of LNG market growth in India.”
On Indonesia's role in boosting SE Asian LNG demand growth, Browne says, "Indonesia will increasingly require LNG as we expect domestic demand to outpace domestic supply. Early coal bed methane pilot well results in South Sumatra indicate that production will not meet previous expectations providing more headroom for LNG"
As for Thailand, Wood Mackenzie expects a trend of higher gas demand due to policy decisions in the power sector, limiting the scope for coal-fired power generation resulting in an increasing reliance on gas-fired power plants. This will drive LNG demand significantly post-2020 as indigenous gas and pipe imports will be unable to meet the demand.
Regarding India, production from Reliance's D6 block has fallen from a peak of 20 billion cubic metres (bcm) in 2010 to 11 bcm in 2012. Wood Mackenzie forecasts production from D6 to continue falling, reducing the overall outlook for Indian gas production. Mr. Browne says, “This will constrain gas availability to the market, mainly impacting the power sector in the medium term. In the longer term, reduced production will preclude the development of greenfield fertiliser production as it is not economical to develop facilities purely based on LNG imports. In addition, LNG demand growth in other industrial sectors is further limited by reduced economic growth expectations.
”With these market developments, overall Asian demand growth will still remain strong as SE Asia will more than compensate for India's slower LNG demand growth. Furthermore, LNG demand expectations for Asia have strengthened in recent years due to the reduced long-term reliance on nuclear power in Japan and Taiwan; as well as an increased role for LNG to China's coastal provinces.
Summarising, Browne says, "What's important in examining this shift in the growth balance is that it demonstrates that the outlook across Asia is dynamic. This highlights the presence of key uncertainties which may further shape the outlook for the region. These include policy issues in India; gas prices and power sector fuel competition in SE Asia; the pace of shale gas development in China and nuclear policies in Japan, South Korea and Taiwan."