Business Today: Forming LNG Buyers Group Faces Multiple Challenges

In the first week of December, executives from the energy industry of five Asian countries including India met in New Delhi. The purpose was to discuss ways to form a group of buyers that would help them strike better deals while importing liquefied natural gas (LNG). The meeting was significant given that these five countries - Japan, China, South Korea and Taiwan being the other four - collectively purchase nearly 70 per cent of the world's LNG, according to the BP Statistical Review of World Energy 2012 report. This was the second meeting to discuss the formation of a buyers' group, the first having been held in December 2012 in Beijing. But will such a grouping work?

"This is a forum exclusively for buying countries so that we collectively have a voice in the international market and can effectively negotiate [LNG import] deals," said B.C. Tripathi, Chairman and Managing Director, GAIL (India), at a media briefing on December 3, the first day of the two-day Asian Gas Partnership Summit. Tripathi added that while discussions were ongoing at the industry level, governments of the LNG importing countries should also talk among themselves for a gas buyers' club.

This is not the first time some countries are considering forming an association in the energy sector. Crude-oil producers have formed the Organization of Petroleum Exporting Countries. To counter OPEC's influence, Western nations formed the International Energy Agency after the oil shock of the 1970s that sent prices sharply upwards. Then there is the Gas Exporting Countries Forum, a group of 13 nations including Russia and Qatar, among the world's biggest LNG exporters. MORE