Asia and Japan — are looking more toward unconventional gas

Amid brightening prospects for increasing unconventional gas production and supply, energy ministers from the Asia-Pacific Economic Cooperation countries meeting recently recognized the need to explore ways to secure supplies coming from streams other than conventional gas.

It was arguably the first recognition of the need to develop unconventional gas at any energy ministerial talks, which underlines the potential of unconventional gas to meet the demand that is now being met by LNG, particularly in Asia.

Following a day of talks in Fukui over the weekend, APEC energy ministers agreed that the group, which accounts for about 60% of world energy demand, should pursue ways of exploiting unconventional gas sources such as shale gas. The goals: reduce carbon intensity of current demand, and enhance the energy security of their economies.

“We therefore need to evaluate the potential for unconventional gas resources to increase gas production and trade in APEC,” the ministers said in a joint statement. “Enhanced natural gas production and trade, drawing upon new discoveries, can ease the transition to a low-carbon economy, since gas has a far lower carbon footprint than other fossil fuels for power generation,” they added.

Just days later, Fatih Birol, the chief economist of the International Energy Agency, told the World National Oil Companies Congress in London June 22.that the boom in natural gas supplies from shale gas deposits in the US is pushing that country toward self-sufficiency. That leaves little room for LNG.

On the other side of the Pacific, power and gas utility sources in Japan — the world’s largest LNG importer — have started looking more closely at unconventional gas sources, including coal seam gas-based LNG, as part of their long-term import portfolio.

The growth in shale gas in the US is having ripple effects on gas pricing throughout the world, including Asia. For example, Japanese sources have said that they have looked at Henry Hub pricing for natural gas, because of a correlation between that benchmark and the price Japan must pay to secure gas on the spot market.

This embrace of unconventional gas is not coming without some concerns. For example, some Japanese gas consumers express wariness that the environmental issues surrounding shale gas raised by its critics, such as those raised about infilitration of groundwater supplies, may hinder its long-term growth. But still, most are confident that unconventional gas might soon become an additional alternative source of energy in the near future.

Platts