Gas in Asia
From Regional Premium to Global Commodity?
This paper assesses the progress that the global gas market has been making in realizing the potential for gas to increase its share of the worldwide energy mix and, in particular, the role that the gas markets of Asia have been playing, and may play in the future, toward reaching this potential.
EXECUTIVE SUMMARY
MAIN FINDINGS
In its 2011 special report entitled “Are We Entering a Golden Age of Gas?” the International Energy Agency anticipated that the Asian gas markets would generate nearly half of the c. 60% growth in global demand projected for the 2008–35 period. The subsequent development of those gas markets therefore provides an important signpost as to whether the global gas market is on the road to fulfilling its potential. With the exception of China, the picture has been mixed, with demand growth that would have been even patchier in the absence of the boost to LNG demand generated by the Fukushima Daiichi tragedy in Japan in 2011. A regional pricing dynamic notable for the existence until recently of the “Asian premium,” has been at least in part responsible for this, and a move toward gas becoming a “normal” commodity market, with pricing that reflects industry fundamentals, will be an important contributor to future market development. There have been some positive signs in this respect.
POLICY IMPLICATIONS
- The development of gas-on-gas competition, delivering clear price signals to both demand and supply sides, provides the best opportunity for gas to realize its market potential.
- This would enable gas to price itself into market, especially the key power-generation sector, delivering important environmental benefits in the process.
- With its strong long-term interest in ensuring cost-competitive energy supply and securing environmental improvements, China may lead the way in pursuing these policy goals.
