Release: Wood Mackenzie: The future of gas prices in South East Asia
Tuesday, January 16 2007 - 12:34 AM WIB
Speaking ahead of his presentation at the INDOGAS Conference in Jakarta on 17th January, Sam Dale, Manager South East Asia, Gas & Power Research for Wood Mackenzie summarised the key findings of the report.
?The economic value of gas ? or ceiling price ? is being raised as the cost of competing fuels such as coal, oil products and LNG increases. At the same time, the break-even cost of supply ? or floor price ? is being driven higher by capital cost inflation and the fact that gas from the closest and least complex reserves has already been contracted? explained Dale.
The report details the increase in gas prices in Malaysia, Indonesia, Thailand and Singapore between 2000 and 2006 and reveals how the higher gas price range in the future opens up new monetization options for gas fields previously considered stranded in South East Asia. ?Technological advances including maritime transport of CNG and mini-LNG business models offer the potential to monetise more distant gas resources than would otherwise have been considered? Dale added.
With Indonesia, Singapore and Thailand actively considering importing LNG, South East Asia?s domestic gas prices will be increasingly influenced by regional and global LNG trade. ?LNG is being sought to fill expected supply-demand gaps and increase supply diversity, and while many of these new markets are relatively close to the gas liquefaction source, their LNG prices will be influenced by competing market options in North East Asia and the US West Coast? explained Dale.
Wood Mackenzie?s analysis reveals that while Indonesia and Vietnam have large reserves of coal which can be utilised in their domestic power generation sectors, the increased cost of this coal means that even higher gas prices than historically contracted can be justified into combined cycle gas turbine power plants. ?Mid-merit and peaking plant can achieve at least $1/mmBtu more than baseload ? gas sellers today are leaving money on the table? Dale said.
The report ? the first from Wood Mackenzie?s recently launched South East Asia Gas & Power Service - concludes that a new regional order has been established in South East Asia?s gas prices, presenting new opportunities for gas sellers, as well as new challenges for gas buyers and national governments. ?The decision over whether to burn coal or gas in power generation in South East Asia is far from clear-cut. The private sector and state regulators alike require an informed view of future fuel costs and market dynamics? said Dale. (end of release)