LNG - great gas in Asia Japan and China want it and Australia has it. Bingo! Or perhaps not. What started out as a simple match of supply and demand is getting complicated. Cost blowouts at home, pressure on price-setting, and cheap US gas make the next year critical to Australia's bid to take over from Qatar as the world's liquefied natural gas capital. Demand, and the need for more supply to meet it, are not for now in doubt. A nuclear-wary Japan plus an energy-hungry China have seen to that. Earlier this month, PetroChina bought 10 per cent of the Australian Browse LNG project for $1.6bn, just weeks after Cnooc paid $2bn for a stake in BG Group's QCLNG project. Japan's Inpex has just finalised funding for its share of the Ichthys development while Mitsui and Mitsubishi, the Japanese trading houses, bought into Browse in 2012. The problem is the cost of supply. If all the approved projects in Australia are completed as planned, capacity will grow fourfold between 2011 and 2018, according to Citi - a far faster rate of growth than Qatar managed. But the pace of growth is straining resources: Chevron blamed rising labour costs, logistics and the strong Aussie dollar for a two-fifths jump in the cost of its Gorgon project. And many of the projects under development rely on high gas prices to break even. While import prices in Asia hold at about $16 per million Btu, those projects work. But Japanese power companies have begun linking LNG contracts not to oil, as has been the custom, but to the direction of gas prices at Louisiana's Henry Hub, which are between $3 and $4 per mBtu. Switching the reference point will not remove the differential, and the wisdom of linking to a fuel that cannot be accessed is questionable, given US wariness to exporting its shale gas windfall. But the direction is clear: Asian prices are under pressure. Without significant US or Canadian exports, Australia's expensive bid for world domination is safe - but only for now. For a country with a goal as grand as overtaking Qatar, that is a precarious position to be in.