http://e.nikkei.com/e/fr/tnks/Nni20100819D19JF983.htm

TOKYO (Dow Jones)--The biggest supplier of liquefied natural gas to the world's top importer of the product has recently been overtaken by competitors after more than 20 years--evidence of the major realignment underway in the Asian, and global LNG sector.

Since the 1980s, Indonesia was the biggest source of Japan's LNG, but in the first six months of 2010 it was overtaken by Malaysia, and more importantly Australia, which is on track to become a key player in the industry.

It will also be a tough competitor in emerging LNG markets to established players like Qatar and newcomers like Russia's Sakhalin-2 project, which started exporting in 2009.

Japan, which accounts for around 30% of global LNG demand, has committed to buying a lot more Australian gas from a string of projects due on line in coming years. Emerging markets China and India have also made commitments, as has existing major buyer South Korea.

"With its new projects, Australia will become a major supplier to East Asia, replacing South East Asian countries where there is little room to boost output," said Japan Oil, Gas and Metals National Corp. analyst Shigeki Sakamoto.

Malaysia and Australia exported 6.88 million and 6.33 million metric tons of LNG respectively to Japan in the first six months of 2010 versus Indonesia's 6.30 million tons, Japan finance ministry data show.

Indonesia's decline is due to it using more gas at home and to insufficient investment in its gas reserves, but future prospects aren't bad.

"There are several new LNG projects under development in Indonesia" including the Abadi project led by Inpex Corp. (1605) and Donggi-Senoro led by Mitsubishi Corp. (8058), said a Japanese official involved in Indonesia's upstream sector.

There are other elements: an Indonesian government official said that while Indonesia will prioritize gas supply for the domestic market, supply to Japan is more than "just a business matter" considering that Japan is the biggest bilateral lender to Indonesia.

Even so, sales to Japan will slump, as term contracts expire at the end of the year and in March 2011, and preliminary deals last year cut overall term volumes to 3 million tons annually from 12 million tons a year.

Australia seem sure to take top spot with Japan in 2011, as the Woodside Petroleum Ltd.-led Pluto project is due to start delivery then of two million tons annually to Kansai Electric Power Co. (9503) and 1.75 million tons annum to Tokyo Electric Power Co. (9501).

The Chevron Corp.-led Gorgon and Wheatstone projects will follow, starting delivery to Japanese buyers as early as 2014. Japan's LNG imports from Australia should more than double to 29 million tons annually by 2017.

One factor in LNG availability is slow U.S. demand due to big rises in unconventional gas output there.

A big question mark for future Asian demand is China, which has three LNG import terminals, is building four more, and has at least eight others planned, prompting it to sign supply deals in recent years with Qatar, Australia-based suppliers and others.

"China will outgrow Japan sooner or later," said Hirofumi Kawachi, analyst with Mizuho Investors & Securities Co.

Just how soon may depend on China's success in developing its huge shale and other unconventional gas reserves. It's been signing deals with Western majors to do this as it lacks technical expertise.

Consultancy Wood Mackenzie forecasts China LNG imports to rise sharply up to 2020, but notes that unconventional gas may account for over 25% of China's total gas supply by 2030, from almost none now.