Asian natural gas market's turn in buyers' favour not surprising, says Aussie official

The turn of Asia's natural gas markets in buyers’ favour should not come as a surprise, according a senior official from Western Australia, the country’s hydrocarbon rich province.

Speaking to Sharecast at the IRN Oil & Gas International Licensing Summit 2015 in London, John Atkins, Agent General, Government of Western Australia, who has a remit for the province’s European Office, described the change in market conditions as "the expected direction of travel".

Most long term contracts in the Far East, Australia’s key export market were linked to the JCC Index, or Japan Customs-cleared Crude, nick-named by regional traders as the ‘Japanese Crude cocktail’. It served to make gas prices in Japan higher, and by extension in nearby South Korea and Taiwan as well.

With panic natural gas buying in wake of the Fukushima tragedy consigned to the history books, Asian utilities find themselves in a strong position to demand price negotiations on contracts that are not heavily predicated on the JCC and actually put out to competitive tender.

Resource rich Western Australia will have LNG production capacity of 49 million tonnes by 2017, equating to 57% of Australia’s total production. However, snapping at Australian exporters heels are rivals from Russia, China and the US as competition heats up.

“We are comfortable with the situation. What people, overtly focussed on Australia’s immense trade ties with China, tend to forget is that Japan has always been a key trading partner for Australian natural gas exports.

"Going back decades, some of the LNG projects in Western Australia would have never gotten off the ground but for tie-ups with Japanese partners. Alongside China and Japan, we have longstanding links with India, South Korea and other importers in South East Asia,” Atkins added.

However natural gas prices continue to trade lower, dipping to as low as $6.65/MMBtu in May; the lowest level in almost five years according to Platts data.

“Admittedly, it is a challenging market, but I fully expect ongoing projects to come onstream. We are well placed for the next five year cycle in a challenging market. The so-called golden age of LNG has advantages for LNG producers and consumers alike,” Atkins said.

Earlier, the veteran Aussie official told Oil & Gas International Licensing Summit delegates that Western Australia has many underexplored regions as a leading natural resources driven provincial economy, accounting for 17% of national gross domestic product.

“We have a lead agency framework to facilitate understanding of regulatory approval process for prospective bidders, great infrastructural support, over 40 major oilfield services companies and 350 international companies with active bases in the Western Australia.

“With AUD$179bn (£92.8bn) of resource projects either under construction or committed to by the respective sponsors, our robust programme of LNG investments will accentuate Western Australia’s position as a global energy force.”