r esources l aw i nternational apec lng trade current situation and future prospects march 2005...
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RESOURCESLAW INTERNATIONAL
APEC LNG Trade
Current Situation and Future ProspectsMarch 2005
Robert Pritchard
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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
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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
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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
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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)
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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.
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Major Natural Gas Trade Movements
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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%
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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
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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
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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.
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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)
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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
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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)
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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)
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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
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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
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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
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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
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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
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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
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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+
+
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APGAS
Asia-Pacific Gas Forum
• proposed by EBN
• will facilitate international best practice
• may be held in Perth in September 2005