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China will decide on the future new pattern of Asia-Pacific LNG

— NEWS —

China will decide on the future new pattern of Asia-Pacific LNG

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Since Brzezinski’s concept of “geo-strategic chess player” in his world-famous book “The Great Chess”, any factor that can influence the change of regional power balance has become the focus of attention. Energy is naturally the focus of attention.

With the climax of the oil era in the traditional sense, the world's major oceans and rivers have begun to carry another liquid fuel. It has become a new type of fossil fuel that can have a profound impact on the global energy structure after oil, that is Liquefied natural gas (LNG).

When Brzezinski was teaching at the Department of Political Science at Columbia University, he couldn’t think of the natural gas that was even used in the oil field at the time to “spot the skylight” (burning the oil field associated with the torch in the form of a torch to reduce the danger). It will be compressed into a liquid one day and shipped to the world with a huge wheel at a temperature of minus 160 degrees.

What made him even more unexpected was that a black student who sat down and listened carefully at the time became a US president. During his tenure, the shale revolution took place in the United States, making this superpower so close to its "energy independence" that it was eager for day and night. And make Shale gas the hottest word in the global energy world.

But one thing, Brzezinski has long thought that China is the “geostratic chess player” of the whole Asia-Pacific region. Its various developments and needs will profoundly affect the pattern of this region. Energy is undoubtedly the most typical representative. .

According to Bentek Energy, a well-known energy analysis company under Platts, the demand for liquefied natural gas in China will reach 56 million cubic meters in 2020, accounting for almost half of the current apparent consumption of natural gas in China. It is still only a conservative estimate. The severe smog that has ravaged the country has made China's demand for such clean energy reach an unprecedented height.

Therefore, Stephanie Wilson, executive editor of Platts Asia LNG, told the “Financial Eleven” that although the traditional market, including Taiwan and Japan, will maintain strong imports in the future, China will decide the entire Asia-Pacific LNG in the future. An important factor in the pattern of market changes.

If you look at the Asia-Pacific LNG market from a broad perspective of the whole of Central Asia, China, Japan and Korea, as the most important LNG importers, dominate the entire LNG East Asian chess game. However, in the game, the supply and demand situation of Japan and South Korea is also changing.

For a long time, Japan and South Korea are seeking stable and long-term supply of LNG. In particular, Japan has already adopted LNG as its core energy source, ranking first in the world in terms of imports. In order to ensure the stability of LNG supply, Japan and South Korea will not hesitate to sign long-term agreements with gas-supplying countries linked to international crude oil prices, and will cooperate for a long time as the most important form of trade.

In fact, for the importing country, this is a relatively disadvantaged form of contract – the gas-supplying country must first sign a long-term contract to be able to develop and produce LNG. In addition, the contract also strictly stipulates that the LNG is transported from the designated liquefaction plant of the exporting country to the designated receiving station of the importing country, and no transfer to Hong Kong is allowed in the middle, so that Japan and South Korea cannot make arbitrage of “two traffickers”.

As a result, the exporting countries have almost killed the main LNG imports in East Asia through long-term agreements, making the spot market a stagnant water with no flexibility. And the general LNG long-term agreement contract period is 20-30 years.

What is more serious is that the by-products generated by a large number of long-term agreements are the famous “Asian premium”. From oil to natural gas, Asia-Pacific countries are grievously paying higher prices than the rest of the world. For example, the 2013 North American natural gas benchmark price Henry hub average price is 3 US dollars / mmbtu, Europe NBP price is 8-9 US dollars / mmbtu, and now the seller's CIF price to Chinese, Japanese and Korean buyers, but as high as 15-16 US dollars /mmbtu.

Therefore, Japan and South Korea are striving to change the current LNG trade situation. Stephanie Wilson believes that Japan may disappear from the entire spot market in the future because they already have enough supply.

On the other hand, after the Fukushima nuclear disaster, Japan's LNG imports surged by 10%, and in 2013 it reached 88 million tons. At the same time as imports surged, Japan’s energy costs also reached historical highs, and finance faced enormous pressure.

South Korea's main importer is Korea Gas Corporation (KOGAS). Since the company is currently adopting a policy of reducing costs, South Korea did not purchase any spot LNG in the market in 2013, and there will not be too much in the spot market in the future. .

Therefore, looking at the entire East Asian LNG market, only China's huge natural gas market is still booming, with a large degree of import growth from both Qatar and Africa. Undoubtedly, what kind of market position, bargaining power, and what benchmark price to use in the future Asia-Pacific LNG market will depend mainly on the development of the Chinese market.

From this point of view, China’s role in the “geostratic chess player” in the energy field has been revealed. However, due to various restrictions in the domestic market monopoly, China still has a long way to go to dominate the Asia-Pacific LNG market.

In fact, China’s monopoly on crude oil and natural gas import rights has led to the abnormal development of the natural gas spot market. For example, China's natural gas spot trading center has been established for four years, but the annual turnover is very small, only a total of 400,000-500,000 tons, almost negligible.

People from the Shanghai Futures Exchange also revealed to the “Financial Eleven” that China’s plans to launch natural gas futures also face many problems, such as tight logistics facilities such as warehousing and the fact that the renminbi has not yet been internationalized.

Therefore, as Brzezinski said: “To become a global power, a country must lead in all aspects, including the attributes of the government, the living standards and rights of citizens.” Similarly, if China wants to be in “natural gas” The era has become a big country with global influence. It must also redefine the government's power boundary with the market, the sphere of influence of state-owned enterprises, and the rights of private oil and gas companies.

It can be seen that the next is a LNG chess game, but the competition is the comprehensive economic strength of a country. If China wants to be so hot and powerful, China is still on the road.