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Asian energy markets to change in coming years

January 22, 2013
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The International Energy Agency (IEA) believes Asia will be at the center of significant shifts in terms of energy supply and demand developments in 2013 and beyond, the agency announced in a statement published on its website.

Asian countries need to be prepared to meet the changes and respond adequately, warned IEA executive director Maria van der Hoeven. The IEA is willing to cooperate with Asian countries to adapt to the changing markets by facilitating market liberalization and mobilizing investment capital, she added.

Oil and gas production using unconventional methods is increasing in the Americas, particularly in the United States, and this fact is set to shift markets in Asia, where economic growth and increased refining in a number of countries is driving demand upward. However, the changing trade balance could also mean Asia will face challenges in pricing and distribution.

At present, Japan and the Republic of Korea are the only Asian countries that are members of the IEA but the agency is cooperating with a number of other countries in different ways. One instance of this partnership was the participation of China, India and the Association of Southeast Asian Nations (ASEAN) in the IEA Emergency Response Exercises, which discussed various problems like the use of strategic reserves and responses to crises.

Several of these countries will stand at the center of the changes that the IEA predicts will take place over the next few years. One of them is India, which is looking to expand the liberalization of its energy sector that started two decades ago. With the positive outlook for economic growth, the country can provide modern energy to its entire population. The country already exports significant amounts of refined products to other Asian countries, competing with Singapore for the position of regional leader. However, the IEA noted that government intervention could impede the positive reforms through bureaucracy and price control.

Currently, Singapore is among the most stable economies and this positions it well to capitalize on the expansion of liquefied natural gas (LNG) trade in the region. In the country itself, the first LNG import terminal will start operation in 2014. According to van der Hoeven, Singapore's rapid growth is "a milestone for Asian gas."

Another country that is enhancing its position on the international oil, gas and coal markets is China. The country is seeing increasing investments in oil production, in line with growing demand. It is also finding its feet as a refining center and a renewable energy production hub. The manufacturing of renewable energy equipment has been quickly revamped to ensure global demand is met, which has resulted in lower costs worldwide, the IEA found. China predicts it will double its natural gas use by 2015, as the country has ample conventional and unconventional gas sources, but to fully develop the sector it will have to overcome regulatory and institutional barriers.

Overall, gas prices vary significantly, van der Hoeven pointed out. While North America is seeing cheaper gas thanks to the boom in production via unconventional methods, prices remain high in Europe and Asia in particular. Gas is essential because of its key role in electricity generation and issues of sustainability will also need to be addressed, she concluded.

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