MEO Australia - About LNG

LNG Forecasted Demand
A review of the major parameters of the world's energy equation-oil and gas reserve volumes, producing capacities, geographic distribution, and alternative energy option-leads to one compelling conclusion: Oil and gas will remain the dominant energy providers for decades, but at ever-higher prices. There will continue to be periodic variance in prices, but the overall secular trend will undoubtedly be upward. Gas, which is the fastest-growing component of primary world-energy consumption, is projected to capture an even greater share of the energy market.

Natural gas will remain the fuel of choice for electricity generation, the fastest growing segment of energy demand, for the foreseeable future. This choice is not only related to the convenience of gas utilization but also results from the increasing burden of environmental considerations. Many countries now depend on gas and their indigenous supplies are depleting. For example, the USA, once the world's largest producer of natural gas, is now experiencing supply shortages. This resulted in gas prices last winter exceeding US$10 Mmbtu on the west coast. Many countries increasingly depend on imported energy such as LNG, including Japan, China, Taiwan, India, Korea and the USA

LNG trade has continued to grow at a rapid rate, 8.2% in 1999. This relates to reductions in readily sourced gas supplies and increases in production and transportation costs. While economic slow-downs can be responsible for variations in the rate of growth, the outlook for future demand is strong. The market position for any new project will depend on the cost of production and the cost of transport to the consumer. The project's capital and operating costs also impact on the competitiveness and the ability to capture market share. Additionally, many of the LNG sales contracts structured as long term supply, which helps support new projects.

The following summary provides forward estimates in potential LNG demand:

Taiwan: current consumption at 4.5 Mmt/a, 13 Mmt/a by 2010 and 16 Mmt/a by 2020
Japan: current growth in demand to slow from 1.7% to 0.9%, 7 Mmt/a by 2010
Korea: 6 Mmt/a by 2010
China: 7 Mmt/a by 2010
India: estimated increased demand from 2005 to 2010, 5 Mmt/a
USA(west coast) & Mexico: 10 Mmt/a by 2010

The LNG demands for many countries cannot be accurately estimated and depend on the transition into new energy systems. China is a good example of this change. Imported liquefied natural gas (LNG) will be used primarily in China's southeastern coastal region. Guangdong province already has launched a project to build six, 320-megawatt (MW) gas-fired power plants, and to convert existing oil fired plants with a capacity of 1.8 gigawatts (GW) to LNG. In March 2001, it was announced that BP had been selected to build China's first LNG import terminal, to be located near the city of Guangdong. Imports through the terminal are slated to begin in 2006, and sources for the LNG are currently being solicited. The estimate of 7 Mmt/a could be considered conservative if the rate of change continues.

MEO expects to position itself for this forecasted expansion in LNG demand.

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