Environmental Engineering Reference
In-Depth Information
The rich coastal states of northeast Asia (Japan, South Korea and Taiwan)
have traditionally been the major markets for LNG, but there are now 17
countries that import LNG and 15 that export it. Europe, especially Spain,
has been a growing market, and in the mid-2000s there was an expectation
that the US would start to draw in major amounts of LNG and many re-
gasification terminals were built. But in the last few years, there has been a
surge in production of US unconventional and tight gas, which has made a
lot of American LNG surplus to current domestic requirements.
Unfortunately, LNG is not an industry that can respond very flexibly
to changes in demand, because it has traditionally worked on long-term
contracts, sometimes as long as twenty years, between buyer and seller.
This kind of point-to-point contract, in which every LNG cargo has a
pre-ordained destination, gives developers and their financiers security
of demand and security of supply which has been very important to the
cash-rich but energy-poor countries of northeast Asia to the customer.
The gas OPEC - a mirage?
Ever since a group calling themselves the Gas Exporting Countries Forum
(GECF) started meeting informally in 2001, gas importing countries have been
spooked by the fear of a “gas OPEC” being formed as a cartel to make them pay
more for their gas. But while the GECF may not always be a paper tiger, it hasn't
really growled yet.
In 2008 members of the GECF, including the big three - the “gas troika” of
Russia, Qatar and Iran - put their association on a more formal footing. They set
it up as an international organisation with a headquarters in Doha, Qatar, with
pledges of cooperation on all aspects of the gas industry, although nothing
explicit was said about prices. It is indeed hard to see how the gas producers
could replicate OPEC, which influences prices indirectly by regulating produc-
tion. The GECF countries would find that very hard to do, because gas produc-
ers' ability to vary the volume or prices of gas exports is limited by long-term
contracts. Direct dictation of prices would be even harder in gas than in oil.
OPEC tried to set an administered price for oil, but gave up the attempt in the
mid-1980s. But at least with oil there is something like a global balance of sup-
ply and demand. In gas, this balance is always regional, with different demand
and supply conditions in North America, Europe and the Asia-Pacific region,
and therefore different prices. The GECF countries could usefully coordinate
their projects to build LNG, the one element in the gas trade that links all these
regions. But even here, common interests are not obvious. Even within the
gas troika, there are big discrepancies in resources and methodology: Qatar
exports all of its gas by LNG, while Russia is only just beginning to try a very
small amount of LNG and Iran, bizarrely, is still a net gas importer.
