http://quote.bloomberg.com/fgcgi.cgi?ptitle=Bloomberg%20Energy&touch=1&T=energy_news_front.ht&s=AOccAmRUhQ2hpbmEs

Link

09/19 01:58 China, India Plan to Switch to Gas as Oil Costs Surge

(Update1)

By Rajat Bhattacharya

Jakarta, Sept. 19 (Bloomberg) -- China and India, Asia's fastest-growing economies, are turning to natural gas for long- term energy security after crude oil prices tripled in less than two years to their highest level in almost a decade.

China, Asia's No.2 energy user and India, set to overtake Korea as the No.3 next year, plan to boost liquefied natural gas purchases from suppliers like BP Amoco Plc, Woodside Petroleum Ltd., Royal Dutch Shell Group and national producers in Southeast Asia and Australia to reduce reliance on oil.

``India is looking at gas as the fuel for this century,'' said Ram Naik, India's Minister of Petroleum and Natural Gas in a statement. ``In this context the gas producers of southeast Asia assume significance.''

Crude oil in New York rose to more than $37 a barrel yesterday, its highest level since the Gulf War, as a yearlong policy of restraining output by some of the world's biggest exporters has drained users' reserves and prompted protests from the U.K. to Australia over high fuel costs.

Gas is a cheaper and cleaner alternative to oil and coal in applications such as power generation and Indonesia, the world's largest LNG producer, Malaysia and Australia, are opening up large new gas fields to compete with Middle East suppliers like Oman and the United Arab Emirates to supply Asian users.

China's consumption of about 4.4 million barrels of crude oil per day is growing at about 10 percent a year. It's the world's second-biggest energy user, and Asia's second-biggest oil burner, after Japan. China plans to build several liquefied natural gas terminals along its coastline, initially in Shenzhen, near Hong Kong, in Fujian province and in Shanghai.

Oil Bill Doubles

India, Asia's fifth-largest economy, consumes about 2 million barrels of oil a day and is struggling to cope with the 44 percent rise in prices this year. Its oil import bill almost doubled in the year ended March to $12.47 billion, from $6.2 billion a year ago, and the government has been unable to pass the increase on to consumers.

In the year ended March 2001, India's oil imports are predicted to rise to $17 billion, M.A. Pathan, chairman of state- run Indian Oil Corp., the country's largest oil refiner, said last week. Oil imports of about 1.2 million barrels a day now make up about 30 percent of India's total imports.

As Asian countries increase their power and fuel needs, gas is expected to be the preferred fuel for applications like new power projects as more supplies and improved distribution become available.

India's energy minister arrived in Jakarta on a four-day trip to meet Indonesian President Abdurrahman Wahid and other top officials, including Minister of Energy and Mineral Resources Purnomo Yusgiantoro.

Indonesia is one of the 11 members of the Organization of Petroleum Exporting Countries which consumers have blamed for the gain in oil prices because of its policy of restricting supply. While OPEC has increased output three times this year to curb rising prices, consumers say the increases aren't enough.

Not Enough

``We want OPEC to raise output by at least 1.1 million barrels per day,'' Naik said. OPEC agreed this month to add another 800,000 barrels a day.

The Indian minister's visit follows a meeting of top energy officials of India and Indonesia in July to sign an agreement to seek closer cooperation in their energy plans, and to pursue a liquefied natural gas purchase contract.

India already has LNG purchase contracts with Oman, to be shipped to a terminal in the western port of Dahej, that will feed fertilizer plants through a pipeline run by Petronet LNG Ltd., a joint venture of Indian oil companies.

The country is now looking to eastern Asia to supply power plants and feed its fertilizer units in the eastern states of Andhra Pradesh, Tamil Nadu, Orissa and West Bengal, said Pathan earlier this year.

Indonesia plans to sell LNG to China from its Tangguh gas fields in West Papua run by BP Amoco and state-owned PT Pertamina and to India from Pertamina's Bontang liquefaction plant in East Kalimantan.

Australia hopes to supply China from its North West Shelf venture operated by Woodside and including Shell, Chevron Corp. Broken Hill Proprietary Co. and BP Amoco.

India's energy minister will also speak at the four-day Indonesian International Oil, Gas and Energy Convention and Exhibition, opened by Indonesian Vice President Megawati Soekarnoputri in Jakarta today.

Other speakers will include Rilwanu Lukman, secretary general of the Organization of Petroleum Exporting Countries; John Browne, chief executive of BP Amoco Plc, the world's third-largest oil publicly traded company; and Wei Liucheng, president of China National Offshore Oil Corp., China's No.3 oil company. ) Copyright 2000, Bloomberg L.P. All Rights Reserved.

-- (M@rket.trends), September 19, 2000