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North America’s shale gas revolution has fundamentally changed North America’ s energy market, thereby bringing new opportunities and challenges to the Northeast Asian LNG market.
For North America, due to the increase in shale gas production, the export-import structure of gas in the US has been reversed, and the possibility of energy independence has increased. In the meantime, Canada, being almost fully dependent on the US for gas export, can not help but explore new markets, which is in fact the Asian market.
For major Northeast Asian gas importers, such as Japan and Korea, which are heavily dependent upon the Middle East and East Asia, Russia’s East Siberia is considered a new alternative for the purpose of diversifying LNG import sources for the past decade. Therefore, Northeast Asian countries tried their best to secure East Siberian gas through enhancing their bilateral relationships with Russia. However, due to the recent shale gas revolution in North America, the Northeast Asian region now encounters new opportunities in LNG contracts, which is totally different from the situation in the past.
In the mean time, once the negotiation on gas prices between Russia and China is settled, 38bcm of Russian gas will be introduced to China, In this regard, Korea and Japan should pay attention to the possible revamp in the Northeast Asian energy market and the impact related to securing energy supplying sources.
Under these circumstances, the introduction of American shale gas with a cheap price and favorable conditions Ci.e., Henry Hub price, without the clauses of take or pay and destination, etc.), or Canadian gas with relative advantages in terms of transportation distance and gas reserves, is predicted to exert a significant impact on the Northeast Asian LNG market.
Given that Northeast Asia has been significantly dependent on the Middle East or neighbouring East Asia in terms of energy security, if the region become the beneficiaries of North America ‘s shale gas revolution, the most notable thing would be that America and Canada, which have been alliances in political and military contexts, will become alliances of Korea and Japan in energy security as well. It can be referred to as a grand paradigm shift.
Apart from North America, Australia and East Africa have huge potential in gas production, which can enhance the buyers’ power in the Northeast Asian LNG market.
For Korea, the implication of East Siberian gas is not simply limited to the area of energy security, since the PNG project (gas pipeline linking Russia and South Korea via North Korea) based in East Siberian gas fields are considered as important methods to secure peace and prosperity on the Korean peninsula and in Northeast Asia. However, this project is thought to have missed a good time to be commenced, and Russian gas is losing its price competitiveness s compared to North America and Australia.
In conclusion, it is necessary to establish new rules and policies in the Northeast Asian energy market and within the regional situation as a whole. Initiatives on the LNG trading hub in the Asian region should be pushed forward through closer regional cooperation. In particular, Korea, Japan, and China, as major consumers, have to share common interests and make the maximum use of the favorable conditions of the shale gas revolution. Furthermore, the scope of cooperation should not be limited to Northeast Asia, which includes Korea, Japan, China, etc., but be expanded to the Asia Pacific region including North America.
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Asia’s share of global demand for natural gas has increased from 13 to 18 per cent over the past decade, and the overall consumption has nearly doubled. At the same time, there is a growing gap between regional natural gas demand and supply, with increasing reliance on imports. Regional liquefied natural gas (LNG) imports are forecast to increase by 60 per cent by 2030, and natural gas has been described as Asia’s “fuel of the future”. Asian LNG importers seek to diversify their supplier mix as much as possible to lower the prices and to reduce economic vulnerability to future disruptions or the failure of any one producer to provide adequate supplies. This paper explores major regional importers’ approaches to LNG import diversification between 2002 and 2012 and explains why patterns of LNG imports differ between states and over time. The focus of the paper is on five largest LNG importers in the region: China, India, Japan, South Korea and Taiwan.
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The successful development of shale gas extraction and production in North America has spread a positive outlook within the international energy community, which envisages that a great availability of gas in the next years will contribute to diversifying the energy mix, reducing emissions, and enhancing energy security. However, the emergence of the “shale revolution” is perceived as a serious energy threat by Russia, because it could severely affect its role as a major gas supplier. Thanks to the combination of LNG developments and shale gas production, a growing gas availability in global markets poses questions about the ability of Russia to keep gas exports to Europe at current levels and to develop the Eastern vector through growing gas exports to Asian markets.
Fabio Indeo holds a Ph.D in Geopolitics, Geostrategy and Geoeconomy at the University of Trieste (Italy). Currently he is EGS researcher and lecturer on “Conflicts and energy resources” at the Master in Peacekeeping and Security Studies (University of Roma Tre, Italy). His research fields are energy security, and geopolitics of pipelines and energy transport routes.
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by Chen Weidong, Jiang Xi-Min and Zhou Xiaolai 11 February 2014 This Special Report was originally published as a Working Paper 2013-6 by the Center for Energy, Governance and Security at Hanyang university, Seoul. I. Introduction The energy sector of China is facing three challenges. This includes ensuring energy supply, reducing carbon emission, and furthering international cooperation. Advancing the E&P of natural […]
In this Special Report, Younkyoo Kim writes that despite both governments’ endless profession of an identity of interests between Russia and China, the truth is quite different. On global issues like intervention in third countries, non-proliferation, democracy promotion and Central Asia, Russia and China jointly act to resist US notions of a liberal world order dominated by its power. However, in regard to the regional security agenda in Asia we find only barely concealed and even potentially serious, if unadvertised, rivalries, e.g. in regard to Japan and Southeast Asia. Thus Russia is trying to do two contradictory things at the same time, namely bandwagon with China on the global and anti-American agenda, while attempting to carve out an independent balancing act directed to constrain China at the regional level. Kim contests that the deep-seated regional divergences between Moscow and Beijing throughout Asia have not been resolved and may not be capable of resolution given the dynamic forces at play throughout these areas.
Younkyoo Kim is Director of the Center for Energy Governance & Security and Associate Professor in the Division of International Studies, Hanyang University, Seoul, Korea.