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Japan, S. Korea complicating LNG markets

Sept. 9, 2013 at 7:52 AM

HOUSTON, Sept. 9 (UPI) -- Policy and regulatory uncertainty from Japan and South Korea could lead to a tighter market for liquefied natural gas in the region, Wood Mackenzie said.

Japan and South Korea combine to make up more than 50 percent of the global demand for LNG. Wood Mackenzie said their governments are buying only the LNG they need to ensure immediate demands are met. Some companies trying to tap into the market, meanwhile, want some form of regulatory clarity before making any commitments for Asian markets.

Wood Mackenzie said it expected "regulatory uncertainty" in Japan and South Korea would create relatively high prices for LNG beyond 2020. This, the company said, is in contrast to lower price expectations beyond 2018.

"While the governments of Japan and South Korea are actively promoting greater competition between new LNG suppliers to encourage lower priced LNG, uncertainty regarding nuclear generation and market liberalization may have the opposite effect and increase the cost of LNG procurement," its report said Monday.

Japan, in particular, started taking on more LNG to make up for the energy shortage from the 2011 meltdown of its Fukushima nuclear power plant.

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