Objectives

In the process of conducting the 1st research "A Long-term Vision of Natural Gas Trunkline in Northeast Asia", it was pointed out that analysis on natural gas market is one of the most importatn key factors toward the realization of natural gas trunkline in Northeast Asia. Therefore, we focus on natural gas markest and related resource and pipeline as the 2nd research titled on "Analysis on Natural Gas Market, Resource, and Pipeline in Northeast Asia".

Natural gas resource and production n East Siberia and the Far East of Russia

• Proved reserves of natural gas in East Siberia is 3,318.2 bcm as of January 01.2002.
• Proved reserves of natural gas in the Far East of Russia is 812.8 bcm as of January 01.2002.
• Natural gas production in East Siberia as of 2020 will be 78.0 bcm in probable case scenario or 115.0 bcm in high case scenario.
• Natural gas production in the Far East of Russia as of 2020 will be 99.9 bcm in probable case scenario or 137.0 bcm in high case scenario.

Details of the natural gas market in Northeast Asia

• Natural gas consumption in 2020 would be 16.2 bcm in East Siberia and 18.2 bcm in the Far East of Russia.
• Real selling price of natural gas for large consumers in 2020 would be US$ 60 - 70 / 10³m³ at lower bound and US$ 90 - 120 / 10³m³ at upper bound in East Siberia, It would be US$ 90 - 105 / 10³m³ at lower bound, US$ 130 - 160 / 10³m³ at upper bound in the South of the Far East of Russia.
• Natural gas demand in China in the year 2020 would be 210.7 bcm in total. Demand in Northeast region, Bohai Rim region, Yangtze River Delta region, Central & South region would increase. Demand for power generation and urban fuel gas would increase.
• Natural gas demand in South Korea in the year 2015 will be 21,243x10³ LNG ton in city gas sector and 6,997x10³ LNG ton in power generation sector.
• Natural gas demand in Japan in the year 2020 would be 86 million kl oil equivalent at lower case, 122 million kl oil equivalent at higher case.
• At present, Japan and South Korea import natural gas in the form of LNG. LNG price in Japan and South Korea are linked with JCC (Japan Crude Cocktail, Crude oil CIF prices in Japan) and Indonesian REP (Realized Export Prices).

Analysis on natural gas price and its mechanism

• Expected piped natural gas (PNG) price from supply-side in 2020 would be estimated at US$ 170 - 200 / 10³m³ in Beijing and US$ 160 - 190 / 10³m³ in Seoul. On the other hand, expected PNG price from demand-side would be estimated at US$ 107 - 133 / 10³m³ in Beijing and US$ 162 - 179 / 10³m³ in Seoul. There is some price gap between expected PNG price from supply-side and that from demand-side.
• PNG from Russia could be competitive with domestic natural gas if Russia exports PNG at lower bound price. It is required to reduce PNG price even more in order to compete with coal in various sectors or compete with fuel oil in industry sector.
• PNG could be competitive with LNG in the South Korean market if Russia exports PNG at lower bound price. Of course the competitiveness depends on the oil price condition.
• PNG would not be competitive in Japan if domestic transportation tariff is expensive. It is necessary to emphasize that the above calculation is conducted under the premise on the Japanese gas demand for PNG as 14 bcm in total. Accordingly, if this volume would shrink as a result of severe competition with LNG, which pushes up to the unit cost of PNG, its competitiveness would become even lower. A key is to make PNG economically more attractive than LNG not only in the surrounding area of a landing point, but also in other areas of Japan. Therefore, it is essential to reduce domestic transportation cost of PNG.

Subject of Future Investigation
Important steps toward the promotion of natural gas utilization and the realization of the International Pipeline Network in Northeast Asia are to investigate the following two items:

• It is necessary to deepen the trial calculation. In this research, PNG price was estimated based on the rough premise. It is required to obtain more detail and the latest information on border price, gas flow, pipeline construction cost and so on and to improve the precision of the trial calculation.
• The promotion strategies of developing the PNG market in Northeast Asia were suggested by each member organization. It is easy to suppose that there is different between the suggestions by supply-side counties and those by demand-side countries. From this time, we should discuss these promotion strategies among the related counties and promote the development of the PNG market in Northeast Asia.

How to Utilize This Report
It is important for the NAGPF to make public announcement of the results of this research "Analysis on Natural Gas Market, Resource, and Pipeline in Northeast Asia" and approach the governments of countries concerned and international organizations, such as the World Bank, the Asian Development Bank, the International Energy Agency and the Energy Charter for the realization of the International Pipeline.

Editorial Committee Asia Gas & Pipeline Cooperation Research Center of China Mr. Shi Xunzhi Prof. Hu Jianyi Asian Pipeline Research Society of Japan Prof. M. Hirata Mr. S. Abe Dr. K.O'hashi Asian Pipeline Research Society of the Russian Federation Acad. A. Kontorovich Acad. V. Larionov Korea Pan-Asian Natural Gas & Pipeline Association Mr. H. B. Sunwoo Petroleum Authority of Mongolia Mr. C. Battumur Working Members Asia Gas & Pipeline Cooperation Research Center of China   Mr. Liu Hequn Ms. Y. Chen   Asian Pipeline Research Society of Japan   Mr. H. Arai Mr. H. Endo Dr. K. Hiraishi   Mr. N. Kusakawa Mr. K. Masuda Mr. K. Nagato   Mr. O. Noji Mr. A. Oba Mr. A. Ooji   Mr. T. Ota Mr. S. Sakamoto Mr. K. Takahashi   Mr.T. Tanaka Mr. D. Uemura Mr. S. Waseda Asian Pipeline Research Society of the Russian Federation   Dr. L. Burshtein Prof. G. Fradkin Mr. A. Kalmychek   Prof. A. Khomenko Prof. A. Kler Prof. Yu. Kononov   Dr. A. Korzhubaev Dr. V. Livshits Prof. M. Mandelbaum   Dr. S. Moiseev Dr. S. Muzytchuk Prof. N. Petrov   Mr.L. Platonov Dr. S. Popov Prof. A. Safronov   Prof.B. Saneev Dr. A. Sokolov Dr. V. Topeshiko   Mrs. I. Yolkina     Korea Pan-Asian Natural Gas & Pipeline Association   Mr. J. H. Joe Dr. M. N. Kim   Petroleum Authority of Mongolia   Dr. D. Batmunkh Mrs. D. Buyankhihing