LNG for the Asia-Pacific: Potential for Cooperation and Sustainable Development

KEY CONCLUSIONS

The Asia-Pacific is the largest consumer of energy resources in the world

“The Asia-Pacific is one of the most rapidly developing, from an economic point of view, regions in the world. At the same time, it consumes the most energy resources because the economy and the population continue to grow”, — Liu Hongpeng, Director, Energy Division, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP); The Global Energy Prize Expert

“It is expected that the Asia-Pacific region will see a 34% increase in LNG consumption by 2022. Asia will account for over 70% of the import of these resources”, — Liu Hongpeng, Director, Energy Division, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP); The Global Energy Prize Expert

Liquified natural gas is the most promising energy export

“By implementing small scale energy projects using LNG, we’ll be able to offer, for the first time, a supply of clean energy to rural regions and increase the population’s standards of living. Today we’re talking about a ‘virtual’ pipeline – we don’t need to build long gas pipelines to supply gas across a long distance – we can build modest gas supply ships and ensure LNG deliveries. We should think not just about economic value and profits, but about human impact. We must put people first. By launching small scale LNG energy projects, we can reduce poverty and facilitate the development of manufacturing in rural regions”, — Alan Lau, President Director, PT Anglo Euro Energy Indonesia; Member of Taskforce on LNG, United Nations Economic Commission for Europe

“Current government policy is focused on improving the island’s environmental situation. Green technology and the use of liquified natural gas have been identified as promising avenues of development. Sri Lanka is transitioning to clean sources of energy and intends to gradually reduce dependence on coal. Although the country’s economy is small, we have a large potential for growth, so LNG deliveries may rise to a significant volume”, — Merrille Godfrey Abeywickrama Goonetilleke, Additional Secretary, Ministry of Power and Renewable Energy of the Democratic Socialist Republic of Sri Lanka

“LNG has many advantages – a reduced environmental footprint, convenient transport – so in large part, the growth in LNG consumption is the result of a transition from coal power plants to gas”, — Liao Xianchun, Professor, Research Institute of Green Development, Jinan University

“From the point of view of infrastructure and economic opportunities for delivering gas along pipelines, the delivery of these natural resources (LNG) is very promising. The LNG market in the Asia-Pacific has been growing recently”, — Liu Hongpeng, Director, Energy Division, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP); The Global Energy Prize Expert

Development of the LNG market requires new business models

“In any case, LNG is a very promising model for Asia, but it demands an absolutely novel approach to business integration and profit is gained through a completely different process”, — Tatyana Mitrova, Director, Energy Centre, SKOLKOVO Moscow School of Management

PROBLEMS

Lack of gas

“Currently 2000 MW [of Bangladesh’s energy capacity - Ed.] remains unused because of a lack of gas”, — Mohammad Hossain, Director General, Power Cell Division, Ministry of Power, Energy and Mineral Resources of the People’s Republic of Bangladesh

Insufficient funds to convert generation from coal to gas

“Where funds are lacking, in regions that have trouble attracting investment, countries will continue to use coal. The smallest capital intensity and energy resource price – these are the key factors in the choice between natural gas and coal”, — Tural Gadirli, Portfolio Manager, QBF Portfolio Management

“The main competitor to natural gas is coal. Currently, natural gas is losing out to coal, even if we take into account harmful emissions”, — Tural Gadirli, Portfolio Manager, QBF Portfolio Management

Financial risks for LNG suppliers

“Clients are increasingly paying attention to spot indices, which increases financial risk for suppliers. Contracts are becoming shorter and smaller and, accordingly, to sell the same quantity of LNG you need to work very quickly and market actively to sell your surplus LNG”, — Tatyana Mitrova, Director, Energy Centre, SKOLKOVO Moscow School of Management

“There’s another important moment with new consumers. Many of them don’t have very high credit ratings. These are developing countries, where national risks are far higher. From the supplier’s point of view, it’s rather difficult to make the decision to work with such countries”, — Tatyana Mitrova, Director, Energy Centre, SKOLKOVO Moscow School of Management

SOLUTIONS

Creating new terminals for LNG

“We are expanding partnership opportunities and plan to create floating regasification units and build new terminals”, — Mohammad Hossain, Director General, Power Cell Division, Ministry of Power, Energy and Mineral Resources of the People’s Republic of Bangladesh

Optimizing contract and project financing mechanisms

“We must preserve a certain about of flexibility and room to maneuver. If we make the decision that energy must be cheaper, we would need to take action with regard to gas prices. This is why it is vital to structure demand correctly”, — Merrille Godfrey Abeywickrama Goonetilleke, Additional Secretary, Ministry of Power and Renewable Energy of the Democratic Socialist Republic of Sri Lanka

“We’re talking about innovative paths, for example, small projects, about customers. The role of users, consumers is growing, and that can be included in contracts. Usually suppliers start to search for more flexibility in terms of their service contracts, and that flexibility comes from the price”, — Monica Sun, Partner, Herbert Smith Freehills LLP

“Sustainable development requires a widescale dialogue between suppliers and consumers. We need to find project financing mechanisms and contract procedure mechanisms that, maybe, don’t yet exist, some sort of mutual guarantees, including with development banks. We need to create a new foundation, new technologies, and new business models”, — Tatyana Mitrova, Director, Energy Centre, SKOLKOVO Moscow School of Management