Three LNG buyers, Japan's Jera, South Korea's KOGAS and China's CNOOC, who were signatories to a memorandum of understanding for LNG cooperation late Thursday are trying to coordinate their efforts to secure more affordable and flexible LNG supplies, Senior Fellow at the EastWest Institute, an international affairs think tank said on Sunday.
Danila Bochkarev told Anadolu Agency that the alliance between the three major consumers of LNG worldwide occurred during the LNG glut when new projects in the U.S. and Australia added to the global oversupply in the LNG market.
The three consumers account for more than 30 percent of LNG cargo purchases in the world, he noted.
According to Bochkarev, LNG supplies increased by 19 billion cubic meters (bcm) per year in 2016, and in 2017-2021 new supplies could reach 161 bcm per year.
"New projects are often capital intensive and require long-term rigid contracts with a predictable price mechanism. Oversupply of gas forces sellers to use more flexible pricing and contract conditions, but this situation will change soon," the expert said, maintaining the gas glut is temporary and could soon retreat.
"For example in Asia, demand went up by 17 bcm in 2016 and new players such as Pakistan are coming onboard," he added.
Under Thursday's agreement, the three Asian LNG buyers will discuss opportunities for mutual collaboration for LNG trade.
According to Jera, specific areas for discussion include the joint procurement of LNG, joint participation in upstream projects, and cooperation on LNG shipping and storage.
Globally, 35 countries import LNG.
Global demand for gas is expected to increase by 2 percent per year between 2015 and 2030 while LNG demand is set to rise at twice that rate at 4 to 5 percent, according to Shell's LNG outlook in February.
Japan is the largest market in the region and globally, followed by South Korea and Taiwan.
Jera previously estimated that it would purchase about 40 million tons of LNG per year, which will make the company the world's single biggest buyer of LNG surpassing KOGAS.
KOGAS imports about 30 million tons of LNG per year and CNOOC imports around 10-12 million tons of LNG per year.
By Murat Temizer
Anadolu Agency
murat.temizer@aa.com.tr