Nascent Gas Markets in the Era of Low Oil Prices
The Challenges and Opportunities for Energy Security in Northeast Asia

EXECUTIVE SUMMARY

MAIN ARGUMENT

At end of February 2016, the first exports of LNG from the U.S. mainland were shipped when the major shale gas company Cheniere Energy’s LNG cargo left the Sabine Pass terminal in Texas. The potential large-scale entry of U.S. LNG exports into Asian markets may trigger flexible trading. Northeast Asia needs to continue its effort to promote regional cooperation and co-prosperity by building a Northeast Asian gas trading hub. Russia will seek to keep U.S. LNG in check through price negotiations. The evolution of an Asian gas hub will be influenced to a great extent by how Russia and China reconsider their energy strategies.

POLICY IMPLICATIONS

• President Moon Jae-in’s plan to reduce South Korea’s use of coal and nuclear power could increase annual LNG consumption by 8 million tons more than previously anticipated, thereby heightening reliance on imports.
• As demand rises, natural gas and LNG supplies from the U.S., Australia, Russia, East Africa, and the Middle East will play an increasingly important role for countries in Asia that seek to improve supply diversification.
• The abundance of Australian and U.S. LNG will continue to exert downward pressure on Asian prices, which will likely encourage Northeast Asian buyers to seek out the most competitively priced cargoes.
• To establish a successful wholesale market and trading hub in Asia, countries in the region need to liberalize key economic sectors and ensure third-party access, supply competition, and deregulated gas prices.

Younkyoo Kim is Professor in the Division of International Studies and Director of the Center for Energy Governance and Security at Hanyang University.