Robust economic growth in Southeast Asia is behind the swathe of LNG terminal projects being developed in Singapore, Indonesia, Malaysia and Thailand. However, there are challenges in making these terminals–and their impact on their respective economies–a success, said expert speakers discussing “Growing LNG in Southeast Asia” at EMART Asia on Tuesday.
Rajnish Gosawami, Head of Gas & Power Consulting for Asia-Pacific & Middle East, Wood Mackenzie, noted that even though LNG regasification projects are being built to address gas supply deficits, terminal capacity is not being fully utilised with the existing contracted LNG supplies. He said these regas terminals are mainly to ensure supply security and that the dynamics of each country is different in each case and would impact their contribution.
Tony Taylor, Research Director at IHS, said good infrastructure is critical for these regasification terminal projects to be successful. Without facilities such as nitrogen blending, the ability to import LNG from diverse sources is limited. An integrated gas network is also necessary in order for gas supplies to reach the growing demand centres.
Taylor said a country’s energy policies are also crucial. For example, he mentioned that Malaysia would become a net importer by 2019–with 60-70 percent of Malaysia’s energy costs being subsidised, he questioned the country’s ability to pay for LNG at international prices without policy reforms related to subsidies.
Gosawami was also concerned that the economics of gas importation are challenged in most Southeast Asian countries and there is a question of how LNG prices will be absorbed into the existing power tariff structure. LNG is more expensive than gas or coal in the region due to subsidies which suppress the tariffs. He said that using LNG as a substitute would not be sustainable employing the existing pricing mechanism.
In order for Singapore to become a hub, both experts agreed that there is a need to aggregate demand for gas across Asia as Singapore by itself does not have a sufficiently deep market for gas. This aggregation could potentially be developed through the Trans-ASEAN pipeline–although they pointed out that differences in regulatory environment, pricing environment, and a lack of inter-government treaties were obstacles to making the pipeline a reality.
Even so, the panellists highlighted Singapore’s advantages as a potential gas hub, including its advantageous geographical location, clear regulatory frameworks and developed infrastructure.
Source: SIEW, October 26, 2012; Image: EMA