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2nd Meeting of the ERIA Research Working Group for "Sustainable Development of Natural Gas Market in EAS Region"

21 April 2014

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The second working group meeting of the ERIA project on "Sustainable Development of Natural Gas Market in EAS Region" successfully concluded on 4th April 2014. The project was tasked out by EAS EMM in the 2013 meeting in Bali. The findings of the project are due to be reported to policy makers by June 2014. The 1st working group meeting was held on 16 Dec 2013 in Jakarta.

Participants of the meeting include senior officers of Ministries in charge of energy issues from India, Malaysia, Myanmar, Thailand, and Viet Nam as well as natural gas market experts from ASCOPE, ERIA, and IEEJ. Mr. Shigeru Kimura and Mr. Ichiro Kutani delivered the opening speeches to kick off workshop discussions.

Mr. Tetsuo Morikawa from IEEJ presented the outlook of natural gas demand and supply in the EAS region. He stressed that natural gas supply would exceed its demand in the future if all the natural gas production projects would be realized and that appropriate natural gas markets and pricing mechanism might be needed to support this natural gas development. His presentation also extended to the outlook of natural gas infrastructure in the region, including both the demand side and the supply side. Finally, he discussed the possible impacts of shale gas to the region, especially focusing on the prospects of LNG export from the U.S. In addition, as LNG import is expected to keep increasing in the EAS region, flexibility in the market is desired and the destination clause, as one of the LNG contract issues, should be revised from single to multiple destinations.

Participants from the abovementioned countries first updated the group on developments of natural gas demand and supply and the corresponding infrastructure in their respective countries. Transnational pipelines that connect new supply sources both in and outside of the region to demand centers in the region, were emphasized, especially for ASEAN and India. In addition, in view of the growing demand and tightening indigenous supply in the region, it was emphasized that LNG regasification terminals will play an increasingly more important role for the region to import natural gas globally. At the same time, enhancing activities by the upstream to explore and develop new indigenous reserves, in many cases under joint development schemes between neighboring countries, should also be a priority.

Mr. Victorino S. Bala from ASCOPE expressed concerns over the security future of natural gas supply to the ASEAN region, especially regarding that of LNG. He also mentioned about a new Trans Asean Gas Pipeline (TAGP) which is a combination of pipeline and LNG in the ASEAN region. Accordingly, ASCOPE proposes the establishment of a natural gas supply buffer mechanism in the ASEAN region, specifically the mechanism demands for institutional arrangements among countries in the region for LNG cargo diversions and swap in the case of supply disruption. The mechanism is under study and MOUs among countries in the region need to be signed to enable institutional changes to be made and to operationalize the mechanism.

Finally, Mr. Ichiro Kutani from IEEJ summarized the discussions of the workshop by drawing preliminary policy recommendations on both the demand side and the supply side of the regional natural gas market. The recommendations highlighted issues in domestic pricing mechanism for natural gas, promotion of upstream activities, flexibility in contracts of LNG supply, as well as promotion of infrastructure investment in the sector.

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