By Michael Lawson King&Wood Mallesons’ Singapore Office
S
ince the middle of 2014, the Asian LNG market has seen oil prices tumble, an increase in supply courtesy of new projects coming on stream in Papua New Guinea and Australia’s east coast in particular (albeit partially offset by curtailment of supply from certain established sources), and sluggish demand. While the demand picture is partly attributable to seasonal factors, longer term structural changes in Asian markets also appear to be playing their part.
This article takes a fresh look at where this has left buyers and sellers in their long term contract price negotiations, and possible implications for price review and flexibility arrangements under those new contracts. We consider what role ongoing efforts to establish an Asian LNG trading hub, most notably by Singapore, might play. And, relatedly, we query whether developments with China’s “One Belt, One Road” Initiative (Initiative) and the nascent Asian Infrastructure Investment Bank (AIIB) might provide renewed impetus for comprehensive natural gas pipeline connectivity in the ASEAN region and an opportunity for Singapore to enhance its hub plans and regional leadership.
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