IEA Executive Director Maria van der Hoeven
Tuesday, 26 February 2013
14:00 – 16:00 JST (Japan Standard Time)
Prince Hall, 5th floor of Annex Tower, Shinagawa Prince Hotel
4-10-30 Takanawa, Minato-ku, Tokyo 108-8611 Japan (Tel: +81-3-3442-1064)
The market for natural gas in Asia is dominated by long-term contracts in which the price of gas is linked, or indexed, to that of oil. In recent years, this has helped keep Asian gas prices much higher than those in other parts of the world, leading to serious questions about whether such a system is sustainable. In this report, the IEA shows what it would take to create a regional natural gas trading hub in which prices aren’t indexed to those of oil but rather reflect local supply and demand fundamentals.
Long-term contracts can play a beneficial role in providing investment security, but their current pricing does not take into account fundamentals and the competitiveness of gas within the energy mix of the mature economies where the gas is consumed. Moreover, without a competitive spot market for natural gas – one that supports and encourages price discovery – there is little incentive and little scope to change current commercial practices. This leaves both consumers and producers with insufficient room to explore different options, which limits the degree to which natural gas can serve as a flexible source of energy for both growing and mature economies.
“Developing a natural gas trading hub in Asia” aims to provide stakeholders with insights on the changes that are required in the Asia-Pacific natural gas sector – both downstream and upstream – to allow a competitive natural gas price to emerge. Building on OECD Europe and OECD America experiences, this report sets out to assess perspectives for these changes in the Asia-Pacific natural gas markets. It identifies obstacles and opportunities for a competitive natural gas price in the Asian economies to emerge.