Massive Potential of APEC Natural Gas Market: Report calls for Collaboration & Investment to Overcome Bottlenecks
A new report presented to the APEC Energy Working Group (EWG) estimates that the global export potential of natural gas should grow to exceed $200 billion per annum (based on current prices) in twenty years.
However the report also notes that an investment of $10-15 billion per annum is required to improve gas transportation infrastructure in APEC Member Economies to overcome a major bottleneck for cross-border natural gas trade.
The report recommends a regional collaborative international forum be established to guide coordinated industry development and to ensure the maintenance of the energy balance of the APEC region.
The report "Great Expectations: Cross-Border Natural Gas Trade in APEC Economies" is a study of best practice in APEC Member Economies that is intended to assist economies to accelerate cross-border gas natural gas trade.
With natural gas viewed as the "swing fuel" to lead the world in the direction of more sustainable energy systems for at least the next quarter century the report cites the export potential of the industry.
"Natural gas is also commonly spoken of as the "bridging fuel" on the way to a hydrogen economy in 30-50 years or more from now," the report states.
"Globally, by 2025, the value at current prices of the additional volume of cross-border natural gas trade should exceed $200 billion per annum. Within APEC alone, the value of the additional trade should exceed $100 billion per annum.
"There is an abundance of natural gas globally. Proved global reserves of natural gas are estimated to be 176 trillion cubic meters (tcm), or 67 times the volume used in 2003."
With the two main transportation channels currently used for gas transportation being pipelines or special tankers as liquefied natural gas (LNG) the report argues that "many of these resources are, however, 'stranded' in the sense that they are isolated from markets and cannot be taken to markets without installing very costly transportation channels."
"There is also a huge geographic disparity between the locations of the resources and the centers of demand."
In its recommendations the report states that the "great expectations of natural gas will not be fully realized unless there is collaboration amongst governments, investors and communities in developing and operating natural gas supply chains.
"A collaborative institutional mechanism is recommended for this purpose, as part of a three-level best practice regime."
The report recommends that best practice in cross-border natural gas trade in APEC economies should be approached at three complementary levels:
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Best practice at the international level calls for the establishment of a flexible, collaborative forum in which all key stakeholders may be engaged
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Best practice at the individual economy level requires investments to be facilitated in exporting and importing economies, and "industry vision" to be devised, markets to be created and regulatory reform to be implemented in importing economies and
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Best practice at the individual project level requires a "total package project management" approach.
In terms of export potential the report notes that within the APEC region "there are five economies that have the most to gain in terms of boosting their future export revenues by supplying natural gas from their abundant domestic resources. Russia is by far the best positioned in this respect but Indonesia, Australia, Malaysia and Brunei Darussalam have much to gain as well.
"Other exporting economies have taken a formulaic approach where exports could only be sanctioned when either the level of gas reserves or the capacity to deliver gas to the domestic market had been satisfied. Papua New Guinea for example requires either a ministerial instrument or agreement with the state before natural gas can be exported. Papua New Guinea has been suggested as a potential site for an LNG export facility although no firm plans have been announced."
Japan, the Republic of Korea and Chinese Taipei are mentioned in the report as major importers of LNG for many years.
"The two APEC economies that have most to gain, in terms of their gaining future access to increased natural gas imports for their domestic consumption, are China and the United States. Both economies are currently planning or installing new LNG receiving terminals along their respective coastlines. Mexico may also become a significant importer.
At the time that this report was written Indonesia, New Zealand, Singapore and the Philippines were undertaking studies for the future import of LNG while Indonesia was considered as possibly becoming an importer as well as a major exporter.
The report was prepared by ResourcesLaw International in Australia on appointment from the APEC EWG in January 2004 to undertake a study of best practice to accelerate cross-border gas natural gas trade in APEC economies. The principal authors of the report were Robert Pritchard and Stuart Bensley. Content in the report is based on information derived from a series of three APEC workshops held between May and August 2004 together with research carried out by ResourcesLaw.
The report was initially presented to the EWG in November and is now available for public distribution. The report sets out the views of the consultants and does not represent the official views of APEC or any of its member economies.