The race to meet Asia's rising liquefied natural gas (LNG) demand is hotting up as North American and Russian producers compete with Qatar and Australia for a share of the lucrative market.
Fuel consumption in the world's fastest-growing major economies China and India is surging as industries and cities expand, leaving producers struggling to meet demand.
"A city of 1 million people is going to be created every week," Dick Benschop, vice president for strategy at Royal Dutch Shell, told reporters at and industry event in Malaysia. "You have to run to be able to stand still."
Top LNG exporter Qatar is boosting shipments to Asia, while fourth-largest exporter Australia has over USD 200 billion of LNG projects on the drawing board and aims to triple production to 60 million tonnes a year by 2020 to help meet Asian demand.
But North American gas producers are also planning to cash in, and want Asian buyers to absorb a domestic gas glut caused by a rapid rise in supply from massive shale gas fields.
US oil and gas company Apache Corp aims to sell to Asia most of the 5 million tonnes per year (tpy) it produces at its first LNG export plant at the Kitimat project in Canada, a senior executive said on Tuesday.
In May, Cheniere Energy received the first US government approval for over 40 years to export natural gas, and is eyeing potential buyers in Asia. Cheniere's project is one of three under regulatory review in the US, while Kitimat and another project are under review in Canada.
China and India, looking to secure energy for their billion-plus populations, could both see LNG imports rise five-fold in the next decade. China's imports are expected to rise to 46 million tpy by 2020 from just over 9 million tpy in 2010, according to consultancy Wood Mackenzie.
Indian imports could rise even faster, to about 50 million tpy in 10 years from just under 9 million tpy in the year to March, according to consultancy Bain & Co.
Russia is also vying for Asia's market. Top natural gas producer Gazprom signed deals last week with Indian firms to supply a total of 7.5 million tpy of LNG.
Top LNG importer Japan is buying more after the devastating March earthquake and tsunami shut down a chunk several nuclear reactors. The disaster has raised questions over future expansion of nuclear power in Japan and elsewhere, and gas will at least partially fill any gap.
Concerns about the environment are also prompting the rush into gas, and the factors combined could take the world into a "golden age of gas," according to the International Energy Agency (IEA). Gas consumption could come close to oil consumption in 2035, the IEA said.
"We are a tad bullish on gas in the next few years," Ian Taylor, president and chief executive of Vitol said. "Asia is at the heart of the LNG import market and even Malaysia and Indonesia will be importing."
Indonesia and Malaysia were the number two and number three global LNG exporters last year, the International Gas Union said in its World LNG Report 2010 released on Tuesday at the industry event.
But the two are facing dwindling output from ageing fields and rising demand from power plants and are looking at imports themselves to meet demand in some areas.
Malaysia expects its first LNG imports in 2013, according to a presentation by a senior government official at the event.
Malaysia is the top supplier to Japan and a big supplier to second largest LNG importers South Korea. The nation has already slipped one notch to become the world's third-biggest exporter in 2010 from No. 2 a year earlier, according to the gas union report.
Indonesia was the No. 2 supplier last year. It was the world's largest exporter from 1984-2005 before being overtaken by Qatar.
Elsewhere in the region, Thailand is set to start imports at a new terminal next month and Singapore's import facility will start receiving cargoes in 2013.
OIL PRICES
Asian oil prices are linked to oil, putting them at a premium to prices in the US and Europe. That provides even more incentive for suppliers elsewhere and also for energy companies looking to develop LNG projects in the region.
"Asia's demand for secure supplies from neighbouring sources will preserve the oil-linked prices for the foreseeable future," Peter Cleary, vice-president of strategy and corporate development at Santos, told delegates at an industry conference in the Malaysian capital.
"Oil-linked prices in Asia works because buyers are comfortable with oil as an established, understood and globally traded commodity."
Santos has a 7.8 million tpy LNG project under construction in Australia to supply mostly Asian buyers.
