Al­ter­nate En­ergy The green op­tions

Enterprise - - TRADE WATCH -

There is a ma­jor shift in the oil and coal mar­kets as these are al­ter­na­tive sources of en­ergy that will re­place nu­clear power af­ter the great disas­ter in Ja­pan. Till 2010, Ja­pan’s ma­jor re­liance was on Malaysia for its sup­ply of liq­ue­fied nat­u­ral gas. How­ever, post-earth­quake, the surge in global de­mand for LNG has stirred the ma­jor oil and gas mar­kets of Rus­sia, In­dia, US, In­done­sia and Aus­tralia.

The month of April wit­nessed a 0.9 per­cent rise in trad­ing of nat­u­ral gas. With In­dia seek­ing an in­crease of 36 per­cent of LNG im­ports from Nige­ria and Rus­sia try­ing to be­come the ma­jor ex­porter of oil to Ja­pan, these mar­kets are go­ing for en­hanced re­fin­ing ca­pac­i­ties in the com­ing years. The di­rec­tions com­ing from Rus­sia’s Premier to en­hance hy­dro­car­bon pro­duc­tion have been trig­gered to cater to the lu­cra­tive Far East mar­ket.

More­over, In­done­sia’s coal min­ing is pac­ing up to meet the 340 mil­lion tonnes tar­get for 2011. This es­ti­mate has arisen from the 310 mil­lion tonnes lifted in the pre­ced­ing year, invit­ing higher prices on pro­duc­tion. The im­por­tance of coal is linked with the re­con­struc­tion phase of Ja­pan. The cheap costs of coal as com­pared to oil and gas are also be­ing re­garded as com­pen­sa­tion over nu­clear ca­pac­ity loss. Sim­i­larly, the coun­try’s coal-fired power plants are also func­tional to meet en­ergy needs. Along with In­done­sia, Aus­tralia leads the coal pro­duc­tion mar­ket.

The US nat­u­ral gas pro­duc­ers are also an­tic­i­pat­ing a pro­duc­tive era, as power plants there have set their pri­or­i­ties with gas as the first choice and coal as the sec­ond. Ac­cord­ing to an es­ti­mate, new pro­ject sanc­tions for LNG pro­duc­tion and av­enues of liq­ue­fac­tion de­vel­op­ments can be seen com­ing up in the fu­ture. But there is an ex­pected con­flict in the cur­rent de­mand and sup­ply re­quire­ments due to con­cerns of buy­ers seek­ing long-term deals with sup­pli­ers, re­sult­ing in lock-in stor­age.

As a gen­eral anal­y­sis, the tight de­mand and sup­ply of gas will con­tinue to high­light global eco­nom­ics, as Ja­pan is in the OECD re­gion which de­mands ad­di­tional nu­clear safety. This fac­tor will cause an in­creased de­mand for al­ter­na­tive en­ergy in the com­ing years.

Cor­po­ra­tions in­clud­ing BG Group, Royal Dutch Shell and Re­liance In­dus­tries, are be­ing re­ferred to as ma­jor ben­e­fi­cia­ries in the cur­rent en­ergy hype. On the other hand, en­ergy ac­tive coun­tries like China, South Korea and Tai­wan will have to pay more for their power gen­er­a­tors.

With the ad­di­tional clo­sure of Ger­many’s seven old nu­clear plants, if Europe aban­dons its nu­clear en­ergy pro­gram, it will lead to Rus­sia be­com­ing the win­ner in al­ter­na­tive en­ergy trade.

This boost is com­pelling for emerg­ing oil and gas mar­kets to make their im­pact on the econ­omy. More­over, the global surge in oil and gas de­mands has the po­ten­tial to drive the sec­ond level pro­duc­tion coun­tries to the first level, as in the case of Aus­tralia seek­ing to be the next Qatar.

The gap-fill­ing role of LNG is soon ex­pected to turn the Pa­cific basin LNG mar­ket in its favour with the fuel be­com­ing a po­ten­tial re­place­ment for nu­clear en­ergy in an al­ready en­vi­ron­mentafflicted world

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