Highlights

  • Consumption growth in the region will be limited during the early part of the year
  • Regional production is increasing faster than last year – but could slow
  • Mild spring temperatures will not boost demand for additional LNG supplies
  • Asian spot LNG prices have continued to fall and are below $7.5/MMBtu

Economic overview

The Chinese government has reduced its targets for GDP growth, but tougher targets for emissions reductions could help prospects for gas into power.

China’s GDP will grow by around 7% in 2015, under the latest targets announced by Beijing. China’s GDP grew by 7.3% in Q4 2014, according to statistics from the OECD. The ‘new normal’ for the country will be that its economy will continue to expand, but at a more modest rate than in recent years. 

Quarterly year-on-year GDP growth rates

  Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014
Australia 1.9% 2.2% 3.0% 2.7% 2.7% 2.5%
Japan 2.4% 2.2% 2.2% -0.4% -1.3% -0.4%
South Korea 3.4% 3.6% 4.0% 3.5% 3.3% 2.8%
China 7.8% 7.7% 7.4% 7.5% 7.3% 7.3%
India 6.7% 6.9% 7.4% 6.8% 7.6% 7.5%
Indonesia 5.5% 5.4% 5.2% 5.0% 5.0% 4.9%
Source: OECD

Beijing wants to cut the country’s carbon dioxide emissions by 3.1% per unit of GDP in 2015. This should help reduce coal-fired generation and improve support for the expansion of the gas market. Although targets and policies such as these have traditionally been difficult to enforce, the government has recently become much stronger in its support for improved environmental legislation. Gas price cuts – expected later this year – will be another key factor boosting growth in the gas market. 

Elsewhere, Japan’s GDP fell by 0.4% during Q4 2014 – the only major economy in the region to contract. This will do little to support growth in the gas market. 

India’s GDP grew by 7.5% in Q4 2014, and the country’s LNG imports have risen on an annual basis at the start of 2015. Further steady economic expansion in Q1 is expected to support Indian gas market growth.