As East Asia is the most populous region in the world, it's no wonder that countries in the area have invested in procurement services to help them acquire affordable energy. Unfortunately, a lack of lucrative trade agreements between both public and private entities throughout the expansive location has made the price of electricity unaffordable for a large number of people.
Opening up the gates
Recently, two economic giants settled an accord that will likely mitigate the aforementioned issue. According to Reuters, China recently solidified a $400 billion deal last month to purchase Russian natural gas, a move that will likely benefit neighboring countries, including South Korea and Taiwan. The resource is expected to be transported to China through a new pipeline linking to Siberian gas fields, which will gradually traffic 38 billion cubic meters a year.
Making friends out of enemies?
One of the chief beneficiaries of this concord is Japan, which pays the world's highest prices for energy, purchasing a third of global liquefied natural gas shipments. Last year, the country spent 7.06 trillion yen ($70 billion) in 2013, primarily to support electricity generation to replace the dormant nuclear reactors that were pulled out of commission as a result of the Fukushima disaster in 2011.
As Japan and China are been regarded as both political and economic rivals, the Pacific nation may consider adopting supplier relationship management programs to help them build a strong connection with Chinese energy conglomerates. The LNG procured by China is sure to result in a new price benchmark that could make the resource more affordable for less robust economies.
"This [agreement] will surely put downward pressure on gas prices and some say it is the beginning of the end of the Asia premium," said Masumi Kimura, researcher at Japan Oil, Gas and Metals National Corp.
Impact on other competitors
The National surmised that Qatar will likely take a hit from the deal. Over the past decade, the country, which is strategically placed on the Persian Gulf, has redirected LNG exports from Europe to Asia in an effort to achieve a better price for its shipments. BP estimated that 16.4 percent of China's LNG originated from Qatar in 2012. It's clear that Qatar may need to consider business process outsourcing to organizations that can make sourcing from the Middle Eastern country more attractive.