Natural Gas Booming in Asia

Source: Daily Reckoning, Chris Mayer  (6/6/11)

"Australia will challenge Qatar as the world's largest LNG exporter."


Daily Reckoning, Chris Mayer

Even before the Tohoku earthquake and tsunami reminded the world that nuclear power is not risk-free, the liquefied natural gas (LNG) market was booming in Japan. In fact, the LNG market has been booming throughout Asia for the last several years. That's good news for Australia…and for a variety of companies that serve the LNG industry.

Currently, Japan is the largest buyer of LNG. Japan and South Korea together make up 53% of current global re-gasification capacity. (That is, the ability to import LNG and turn it back into a gas for consumer and industrial use.)

Pressed against this new demand is an aging supply base in places. For instance, there are old LNG fields in Malaysia and Indonesia coming to the end of their useful lives.

So how will the market meet this surge in Asian demand? That's where LNG from nearby Australia comes in. The amount of money flowing into these markets is just staggering.

The Gorgon Project alone—a joint venture between Exxon Mobil, Chevron and Shell in Australia—will cost some $50 billion to develop. It already has supply contracts from India and China worth $60 billion and will surely get more contracts before the gas starts flowing in 2014.

As a result of all this activity, Australia will challenge Qatar as the world's largest LNG exporter. "The numbers are phenomenal," an Aussie analyst remarked about his country's LNG growth curve. "It's going to be LNG boom times."

Asian buyers love Australia LNG because it's close…and secure. The gas doesn't have to pass through the war zones of the Middle East or the pirate-infested waters off Somalia.

The big energy companies are already moving in, and the growth in LNG production from Queensland alone has tripled in recent years.