Recently, as a buyer’s representative, Li Yalan, chairman of Beijing Gas Group, said at the G20 Natural Gas Day in Tokyo, Japan, that the long-term existence of LNG Asian premium would seriously limit the sustainable development of Asian natural gas market. “At present, the global natural gas market resources have entered a period of oversupply. With the increase of the number of sellers, the market competition becomes more intense.
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It is understood that the “Asian premium” of natural gas refers to the lack of pricing power, which results in higher prices of natural gas (mainly LNG) traded in Asian markets than those in North America and Europe. Asian countries, especially those in Northeast Asia such as China, Japan and Korea, are forced to pay higher import costs of natural gas for a long time.
Data show that in 2018, the average annual spot price of LNG in Henry Hub and NBP is US$3.16 and US$8.05 per million British heat units respectively, while the average import price of LNG in Northeast Asia is US$9.41, and the market price ratio of US, Europe and Asia is 1:2.5:3. Thus, compared with the North American and European markets, LNG prices in Asian markets are generally higher.
LNG exporters increased from 12 in 2000 to 21 in 2018, Li Yalan said. Asian market leading buyers have changed from traditional buyers such as Japan and South Korea to emerging market countries such as China and India, which have large volume, great potential for development and diversified natural gas supply channels.
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She further said that Asia was the main growth engine in the global gas market. In 2018, Asia accounted for 20% of global natural gas consumption and 32% of global natural gas consumption growth. Global LNG trade growth mainly comes from Asia. By 2030, Asian consumption will account for 24% of global total, and 60% of global LNG demand growth will come from Asia.
The Natural Gas Market Report 2019 released recently by the International Energy Agency (IEA) points out that global demand for natural gas will continue to grow in the next five years, with the significant increase in gas consumption in Asian economies and the gradual improvement of the international natural gas trading system. In 2018, global natural gas demand grew by 4.6% year-on-year, the highest growth rate since 2010. Global natural gas consumption accounts for about half of primary energy growth. Over the next five years, the global demand for natural gas will grow by more than 10% annually, and the annual consumption of natural gas will exceed 4.3 trillion cubic meters by 2024.
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“The time is ripe to eliminate the Asian premium.” Li Yalan suggested that first, China, Japan and South Korea should strengthen cooperation to study and analyze the causes of high premiums and avoid premiums in new contracts; secondly, the buyer should have full trust so that the seller can fully understand, evaluate and adjust the current market environment; thirdly, the seller should take the initiative to reduce costs and share low-cost Dividends with the buyer; fourthly, eliminate “non-negotiable payment, destination and resale”. Limit”and increase the price review mechanism to help buyers reduce risks and achieve win-win situation.
It is reported that the G20 Natural Gas Day is a special meeting on natural gas under the framework of the G20, aiming to provide a dialogue platform for leaders of international organizations, industry leaders and policy makers on the development of the natural gas industry, and to provide ministers of energy of the G20 with the latest trends, market views and professional suggestions on the development of the natural gas industry.