BMI believes, that with no domestic energy resources, Hong Kong is going to face the challenge of meeting growing oil and gas demand through imports only. Having mainland China next door does hep, as the outlook for Hong Kong is linked directly to its parent state however, the country may look to importing increasing amounts of electricity directly, mitigating slightly its dependence on foreign energy resources.
BMI have said that the rate of refined oil products demand growth and imports should match underlying GDP trends closely, and expect the expansion to be moderate over the coming years. However, a push towards energy conservation may lead to a modernisation in market expansion. This implies that demand will rise from 354 000 bpd in 2014 to 439 200 bpd by 2018 and to a possible 535 950 bpd by 2023. Of course, all of this will be imported.
This year, BMI put the cost of refined petroleum product imports at US$ 14 billion, rising to US$ 16 billion in 2018 and US$ 19.8 billion by 2023. Hong Kong imports refined petroleum products, meaning that the total import bill is far higher than it would be for crude alone. Natural gas imports this year are estimated at US$ 1.96 billion, and US$ 2.62 billion for 2023.
New legislation intended to streamline the Japanese refining sector saw approximately 400 000 bpd of capacity taken offline. Due to this, BMI expects weak refined product demand to continue offering limited future prospects for the sector. BMI is also expecting the first nuclear power plants to return to the Japanese grid later this year, reducing the need for fossil fuel imports. However, the company does expect LNG demand to remain high as a significant amount of nuclear will remain offgrid.
The legislation above, stipulates an increased ration of heavy residue cracking. The law was entered into on 31st March 2014 and saw the net shutdown of 400 000 bpd of distillation capacity. BMI predict that this will cut Japan’s refining capacity to 3.94 million bpd, over 1 million bpd lower than the early 2000s. Due to the reduction in refining capacity, Japanese refiners have already begun reducing volumes on annual crude import contracts and with Iran still under sanctions, it is likely to take the brunt of this.
In a move that could potentially mitigate high LNG prices, Japanese companies have been among the most keen to support LNG export projects from the USA. Osaka Gas, Chubu Electric and Toshiba have all signed contracts with Freeport LNG. KEPCO and Tokyo Gas have signed with Cove Point and TEPCO with Cameron LNG. Most of the US LNG exports are expected to be indexed to Henry Hub.
BMI has said that both oil and gas consumption is set to rise in the short term as demand grows in tandem to economic expansion and facilitated by a generous subsidy regime. However, BMI does expect growth to slow on expectations that subsidies will be gradually reduced over time owing to fiscal necessity, thereby correcting some of the excesses in domestic oil and gas consumption.
When it comes to refining in Malaysia, BMI has upgraded its forecast due to the inclusion of the RAPID refinery owned by Petronas. This will bring the country’s refining capacity from 2014 levels of 588 000 bpd to 888 000 bpd by 2022. There is however possibility of further delay in this project would mean it comes online later than 2019.
Papua New Guinea
The first deliveries of LNG from ExxonMobil’s PNG LNG facility is expected in July this year and there continues to be new proposals for LNG exports, including Total’s monetisation plans for the Elk/Antelope fields and a possible FLNG development by Osaka Gas. BMI expects gas projects to offer some relief to a decline in liquids output, condensate from the PNG LNG project will give oil production a bit of a boost.
Overall, BMI remain largely optimistic about PNG’s gas sector and expect it to expand beyond the initial two trains due online from the ExxonMonil project. First gas from the project is expected to treble PNG’s exports and boost its GDP by at least 20%. Production growth is expected to grow from 0.1 billion m3 last year, to 14.8 billion m3 by 2018.
PNG remains strategically located for exports to Asia and benefits from significantly lower developments costs than projects in Australia. This, BMI believe will help make PNG gas competitive, even as competition from new projects in East Africa, Russia and the US increases.
Adapted for web by Claira Lloyd
Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/02062014/oil_gas_asia_bmi/