Caspian Report - Issue: 08 - Fall 2014

MATTEO VERDA
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traditionally accounts for the largest
part of the market. In fact, distance
from the producing countries and
geographical features such as insularity
or limited availability of local
energy sources created the conditions
for an early and massive development
of the LNG technologies in
the region. In 2013, Eastern Asian
countries accounted for three quarters
of the global LNG consumption.
LNG TRADE REQUIRES SPECIAL TERMINALS FOR
LIQUEFACTION AND REGASIFICATION PROCESSES.
Three final markets in particular
provided the bulk of demand: Japan,
South Korea and China.
The Japanese economy is heavily industrialised,
with large primary energy
consumption combined with a
particularly small domestic production
of energy. As a consequence, it
relies on imported fossil fuels both
for transport (oil) and power generation
(mainly natural gas). In 2010,
Japan imported 92 bcm of natural
gas - 32% of the world total - exclusively
via LNG. After the Fukushima
Daiichi disaster, Japan substituted a
significant share of its nuclear power
generation with natural gas, increasing
its dependence on LNG imports.
Thus in 2013 Japan imported
116 bcm, 37% of the world total.
South Korea is similarly dependent
on imported gas for power generation,
and it is the second final market
at the global level: it imported
54 bcm of LNG in 2013, i.e. 17% of
the world total. The third is China,
which imported 54 bcm (9%). Unlike
Japan and South Korea, the Chinese
economy currently has a low
level of dependence on imported energy,
since it retains a large domestic
production. However, its increasing
final consumption and the need to
reduce coal consumption in several
polluted regions are driving a significant
increase in natural gas imports,
both via pipeline and LNG.
Besides those three large consumers,
other growing Eastern Asian economies
represent a dynamic market for
LNG. In particular, Taiwan is a relatively
mature market, while India is
set to become one of the most important
players at the regional and
global levels in the coming decades.
Both countries imported 17 bcm
each in 2013, i.e. slightly more than
5% of the world total.
Outside Eastern Asia, the most important
LNG regional market is Europe.
Demand in the region has been
significantly reduced following the
economic crisis and massive subsidies
provided to renewable sources,
which undermined final market for
natural gas in the power generation
sector. Moreover, the flexibility of
LNG supplies allowed exporters to
reroute their flows towards more
dynamic markets after the onset of
the current crisis. As a consequence,
EU overall demand of LNG dropped
from 80 bcm in 2011 to 39 in 2013,
13% of the world total. Four countries
constitute the EU core markets:
Spain (12 bcm), the UK (9), France
(8) and Italy (5). Germany, the main
European gas market, has no regasification
capacity, relying on piped
gas from Russia and Norway. The
only other relevant natural gas market
in the region, Turkey, imported
6 bcm via LNG in 2013, and was not
affected by the EU’s economic crisis.
Latin America is a smaller but more
dynamic regional market. Overall, its
consumption amounted to 25 bcm
in 2013, with an annual growth of
34% and a global share of 8%. Mexico
is the largest importer (8 bcm),
followed by Argentina (7), Brazil (6),
and Chile (4). The increasing role
of Latin America is driven by the