Douglas Westwood, Canary Provide Views on Asia Pacific Oil, Gas Industry

Singapore Exhibition Services Pte Ltd., organizer of OSEA2014 to be held in Singapore in December, announced Thursday that it had interviewed John Westwood (JW), group chairman of Douglas-Westwood Ltd. and Dan K. Eberhart (DE), CEO of Canary, LLC -- keynote speakers for the conference -- on their views of the current and future oil and gas landscape as well as business opportunities in the Asia-Pacific region.

The Asia-Pacific is a huge, growing market for the oil and gas industry -- from 2000 to 2010, accounting for 56 percent of the increase in global primary oil demand. The Baker Institute estimates that it will account for 70 percent of global oil demand from 2010 to 2020. The region will also be boosted by the development of both onshore and offshore gas markets, driven by growing regional demand and high gas prices in Japan and South Korea. Countries such as China, Indonesia and Australia are developing shale gas and coalbed methane (CBM) projects in the long term, while the offshore market will see floating liquefied natural gas (FLNG) projects and drilling projects at shallow water gas well and some deepwater areas. As the region relies heavily on imports, this growth in demand is an opportunity for international companies to tap into the burgeoning Asia Pacific market.

Pegging Gas to Oil Prices on Industry Growth – Impact on Asia

JW: The impact of low US gas prices is already being felt in Europe with evidence of some large energy user industries planning to locate new build projects in the US. At the same time, the cost of building new liquefied natural gas (LNG) plant onshore Australia – a key supplier to Asia – has soared to the point where it has become economically unviable. The country stands to lose $97 billion of potential LNG projects to East Africa and North America unless radical cost reduction is applied. Furthermore, Russia and China’s $400 billion gas deal could possibly also undermine some of Australia’s gas projects. In order to assure its industrial future, the Asia Pacific (APAC) region needs to be taking a very long-term view on energy, not only by increasing supplies and their diversity, but by improving energy efficiency. In this, the need for progressive removal of fuel subsidies in countries such as Indonesia is a vital element.   

Asia’s Foray into Foreign Energy Ventures

JW: China has been investing tens of billions of dollars per annum in foreign energy ventures, effectively forward buying access to oil and gas supplies – a situation driven by its growing demand. Others meantime are also facing oil production decline – Australia, Brunei, Indonesia and Malaysia were all down last year. According to BP, in 2013 total regional production fell 1.7 percent while consumption increased 1.5 percent. Meantime, regional gas production increased by 1.1 percent; however, consumption grew by 2.2 percent. So yes, expect to see a lot more deal-doing.

DE: Asian energy consumption is skyrocketing, and so is their population. There’s really no reason to believe that state-owned companies won’t continue to make deals with foreign oil and gas suppliers. For example, the biggest deal in 2013 was China National Petroleum Corporation paying $60 billion as upfront payment for Rosneft of Russia’s crude of 300,000 barrels per day for the next 25 years. Plus, China Petroleum and Chemical Corporation, an NOC, recently established a strategic alliance with Exxon, with a goal of establishing a refinery complex in Eastern China and “become a major marketer of petrochemicals throughout China.” Japan and Singapore have also made diversified acquisitions. Like China, Singapore is working on initiatives with Exxon, including an expansion on a refinery and petrochemical facility that will be the largest integrated manufacturing site in the world.

Opportunities for Non-Oil Producing Regions in Offshore Production

JW: Offshore APAC market will see large gains in shallow water gas production with Shell and Petronas both having FLNG projects planned. High gas prices in Japan and South Korea will further boost regional activity. This could see shallow water drilling grow 29 pecent over 2013-20. Deepwater gas developments will come mainly from China as CNOOC look to boost production from green-field projects in order to meet rapidly growing domestic consumption. We expect increasing numbers of development wells to be drilled offshore Asia-Pacific in 2014, with Thailand heading the league table with some 370, followed by China and India each drilling around 200. In all, we should see annual development well numbers exceed 1,600 by 2020, a growth of over 30 percent over 2013 numbers.

Amongst the non-oil producers, Singapore and Korea as the world’s major offshore vessel builders face growing challenges from the on-going development of the Chinese yards and will need to continually review and develop their strategies, focusing more into high value high technology products such as FLNG, and perhaps growing their non-vessel activity – an example has been Korea’s work on LNG modules.