China has a serious problem, and that is the pollution. You have probably been there, or seen some pictures from a very cloudy China? Some days in China is described as life threatening. People walk around in the city with masks and look like zombies from another planet.
The Chinese government need to do something very fast, and one thing they have decided to do is to slow down the crude oil consumption. Therefore, China`s demand for natural gas will increase and they need to pay a heavy price, simply because of the supply and demand in the market right now.
They need to buy more than they can produce, and that is a recipe for energy disaster for them, because they must import more natural gas, which gives the rest of the world an energy boom, and that is a game changer for the natural gas industry.
The Chinese government must act fast, because of the rising costs from pollution related illnesses. Their natural gas reserves aren`t the biggest problem for them, but their pipline infrastructure is weak, in addition to the location of the reserves and the inadequate technology to extract these reserves.
Exxon Mobile says in a study that China`s natural gas consumption will almost triple this decade to 14 Tcf (trillion cubic feet). China produced only 3,3 Tcf last year, while their consumption of natural gas was 5 Tcf, and the gap between supply and demand is growing fast.
It`s estimated that natural gas will provide 10% of all the energy used in China by 2020. Some of that will be made in China, but most of it will have to come from imports. If you think that this is a great opportunity, you have to think again, because who will profit from this boom? Putin`s Russia and Australia will!
Gazprom signed a 30-year deal to supply China with 1,3 Tcf of natural gas per year, starting in 2019, and that contract is worth $400 billion. The gas will come from Gazprom`s prolific fields in Siberia.
The Australian Woodside Petroleum will also profit from it, because they are close to China`s LNG operations that is already up and running. They have piplines on Australia`s West Coast, and they have invested over $200 billion in LNG operations. Australia is expected to unseat the current LNG leader, Qatar in the next few years.
Qatar is the world`s biggest supplier of LNG, and by 2020, the U.S will account for about 11% of the total LNG exports. Australia has a massive potential to become a big exporter of LNG, as they are Asia`s closest source of LNG. We are talking about South Korea, China and Japan, and that`s the main reason why Australia will become the world`s biggest supplier of LNG in a few years.
LNG exports will displace iron ore as the biggest source of Australia`s export growth in the next years. It`s expected that Australia will export 80 million tons of LNG by 2018. According to Australia`s Bureau of Resources and Energy Economics, earnings from LNG projects are forecast to increase five times. More than $49 billion through June 2018.
Australian gas output will rise to 100 million metric tons by 2018. It`s gas exports are expected to increase to 81% of production by 2018 (53% in 2012), they has more new LNG plants under construction than any other country, including the United States. The new projects will add 61,4 million tons of LNG capacity by June 2018, and they will have 85,8 million tons of capacity by that date. There are only 17,8 million tons of LNG capacity under construction in the U.S.
Another country`s that can become massive LNG exporters in the future is Canada and Africa. The problem in both country`s right now is their infrastructure. I will write about that later in a new article from shiny bull.
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