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Natural gas war set to intensify in Asia

As the Asian giants are looking to reduce over-reliance on coal-powered energy, the region is becoming a darling of natural gas exporters. Both Russia and the United States, two biggest producers of natural gas along with other major players like Australia and Qatar are increasingly looking at the region for future gas exports. The war over market-share in Asia is likely to get intensified as the United States under the Trump administration looking to fully open up the potential of US energy boom.

After 18 months of exporting, some 35 percent of all U.S. LNG has reached Asia. This year, for the first time ever, India imported U.S. LNG. The war is set to intensify as the ability of the Asian giants to produce more of their own gas is in serious doubt. For example, there are great shale opportunities in China, but the future is limited due to water shortages, a pipeline dearth, low prices, physical remoteness of the resource, and uncertainties for foreign experts in dealing with China's state-owned enterprises, and a variety of other factors.

Another interesting case in Asia is Japan, where several long-term LNG contracts are due for expiry in 2020 and Japan is increasingly looking at the United States to diversify its sources. Japan is the biggest importer of liquefied natural gas (LNG). However, recent years saw a decline in growth in Japan’s natural gas demand. After declining in 2014 and in 2015, gas demand has shown signs of revival in 2016. Japan currently accounts for 3.1 percent of global natural gas demand.

The biggest prize, however, is China, which will prove to be a lottery for Russia in the coming decades. The close diplomatic relations between China and Russia is likely to make the latter a preferred source of imports to China. China currently accounts for 5.9 percent of global gas consumption and the demand growth has been extremely encouraging. Despite a slowdown, China’s gas demand increased by 7.7 percent in 2016, after rising at a pace of 15 percent over the past decade until 2015. Currently, Australia is the biggest exporter of natural gas to China. Report shows, China will account for the 40 percent of new demands from Asia in the years ahead.

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