Articles from 2012
We are prepared to adjust to revolutionary thoughts
- Published Date
- Written by Nick Grealy
No, the title isn't lifted from a Red Guard self-criticism session, it's a quote from XOM!
TOKYO, Sept 21 (Reuters) - Asia's energy-hungry nations may be finally making headway in their push to scrap oil-linked natural gas prices as the high cost of the fuel threatens economic growth, especially in Japan, the world's top importer of liquefied natural gas.
Removing the link between gas prices and oil and moving to the so-called hub pricing would drastically cut the cost of importing natural gas, but producer countries like Qatar have long opposed such moves.
LNG is expensive in Asia at about five times the cost of natural gas in the United States where a shale oil and gas boom has driven down prices.
"We are prepared to adjust to revolutionary thoughts. I do think we are hearing this message," Thomas R. Walters, vice-president of Exxon Mobil Corp and head of its gas and power marketing arm, told a conference of LNG producers and consumers this week in Tokyo.
Wow! Did he really say that? Yes he did, and the obvious question for people as disparate as WWF, Gazprom, Greenpeace, Centrica, DECC and Ofgem is: What about you guys? When are we going to hear people facing up to facts,instead of same old tired excuses:
And we’re competing with fast-growing economies which are hungry for gas. Demand in the Middle East is rising steeply; the IEA think it will rise 20% in the next five years, outstripping supply. China alone is expected to double its demand by 2017. No wonder the consensus is that gas prices will either remain high, or go higher.
I've been saying for sometime that the breaking of the oil gas link is inevitable, but all the old energy dinosaurs, say it won't happen or not for years. That was the unanimous conclusion at the Montel Energy Day in London two weeks ago for example. Except little old party-pooper me of course. But the next week in Tokyo we see reality intruding in a way that should happen here.It will but when? More quotes here including from the Director of the Oxford Institute of Energy Studies who told me back in 2008 that shale gas would never have an impact in Europe. But he's a smart man, and even he seems to have been swept away by revolutionary thinking. He'll be at Gastech in a couple of weeks, I'll see if these thoughts survive the flight back:
TSUYOSHI OKAMOTO, PRESIDENT, TOKYO GAS CO
"Japan's LNG prices have deviated significantly from internationals norms. If this discrepancy continues, it will result in curbed natural gas consumption and conversion to other energy sources. Therefore, we aim to bring East Asia LNG prices into convergence with international standards by introducing the link to U.S. Henry Hub and European gas prices."
PROF. JONATHAN STERN, OXFORD INSTITUTE FOR ENERGY STUDIES
"The gas pricing system in the three markets is no longer logical. European prices have started to reflect Henry Hub prices and the situation is changing. Russian gas has also moved to near the levels of Henry Hub."
"Japan's oil-link indexing is illogical. Even if it takes time setting up Asian markets, LNG prices should be linked to Hub prices."
Jonathan Stern? Dieter Helm? Daniel Yergin? How many more experts will it take to change the narrative away from Centrica and National Grid's peak gas foolishness? Back to the original link and we see more comments worth listening to:
There will have to be a hub developed in Asia like in the U.S. and Europe," Charif Souki, chairman and chief executive officer of Cheniere Energy Inc, told Reuters.
Under a decades-old system, Japan and South Korea, the two largest LNG importers, tend to buy most of their long-term LNG supplies through long-term contracts, with prices linked to oil.
PRODUCERS MUST ADAPT
The pricing issue has come to a head as Japan has ramped up LNG imports after last year's devastating Fukushima crisis that crippled the country's nuclear power sector.
Japan logged a second straight month of trade deficits in August, partly due to an increase in its energy imports.
This from GDF is interesting as they have often been tied to Russia in a similar to Centrica in denying European shale, including Frances's own:
Changes to LNG pricing are inevitable, some producers say.
"It's difficult to sustain for a long time the argument that I don't care about my customers," Jean-Marie Dauger, executive vice-president of GDF Suez, told Reuters at the conference. "If we don't adapt then the demand will diminish."
Things are changing. We'll see the emergence of UK shale once the inevitability sets in, or once they've cashed out of the market or retired on fat pensions. Almost every energy "expert" in the UK will be trying desperately to airbrush their shale doubts out of history soon enough.