Too Much LNG On The Market

[sydbod]

http://online.wsj.com/article/PR-CO-2014...11265.html

"Prices of spot liquefied natural gas (LNG) for August delivery to Asia plummeted 26.5% year-over-year to an average $11.365 per million British thermal units (/MMBtu), the lowest monthly average since April 2011"

"The ExxonMobil-led Papua New Guinea integrated LNG project has been seen as a bearish factor on the spot market," Wilson said. "The added supply has contributed in part to pushing down spot prices. With Korea Gas still long on cargoes and a potential restart of Kyushu's Sendai 1 and 2 nuclear reactors in Japan looming, sentiment looks bearish in the near term."

With all the new LNG plants and expanded capacity plants comming on line over the next few years, things are not looking too good at the moment.

[Palm]

Very short term and limited view. Other articles are out there which state this is quite temporary and soon prices will be headed back up. Probably not to the extremes they were but to levels lower cost projects will be even more in demand.

And what do these lower prices do for the "scare" of having US LNG exports make a dent in Asian supply? It makes that LNG too expensive.

LNG will be fine for projects like PNG LNG and Gulf LNG. But you have to look long term.

[jft310]

So Asia is not growing in population and will not need more LNG in the future? There is no rise of the Asian middle class? The PM of Japan is not visiting PNG looking for better relations with a resource rich country?
And Interoil has no LNG for sale today
Most important these are spot prices which is 20 percent of the LNG market at most. Can we please talk about the 80 percent of the market today?If one wants to talk about today ,
Repeat Interoil has zero LNG for sale today .

[Palm]

Full market analysis shows this is quite temporary

"East Asian LNG at post-Fukushima low amid dwindling demand

15 July 2014 | Simon Ellis, ICIS LNG Analyst

East Asian front-month spot LNG prices have fallen to their lowest levels since March 2011 amid lacklustre demand in the region. However, traders anticipate a strong rebound in early negotiations for deliveries over the coming winter.

The August ‘14 EAX contract was assessed for the last time on Tuesday, at $10.794/MMBtu, having shed $1.394/MMBtu since it rolled to become the front month on 16 June. The September EAX contract fell by $1.675/MMBtu over the same period to $10.863/MMBtu.

The East Asian front month spot price was last assessed below $11.000/MMBtu in March 2011, in the immediate aftermath of the Japanese earthquake which caused the Fukushima nuclear disaster.

The discount of northwest European to Asian prices has decreased only slightly over the period, as LNG arrivals continued to put downward pressure on northwest European hub prices.

Lack of buyers for August

As the front month rolled on 16 June, remaining August demand appeared threadbare, as only Japanese electricity utilities and Taiwan’s natural gas monopolist CPC were cited as potential buyers.

Any demand for the month appeared adequately met by suppliers from within the Pacific Basin. Russia’s Sakhalin, Australia’s Northwest Shelf and Indonesian state oil company Pertamina all awarded tender cargoes into the region in the second half of June.

The supply balance was further tilted toward buyers by KOGAS, which continued to attempt to offload up to 40 summer cargoes in return for winter volumes.

The highest bids for August were recorded at $11.250/MMBtu on 16 June, but bids slipped to $11.000/MMBtu on 23 June. The lowest offer on the latter date was recorded for $12.000/MMBtu for both August and September delivery.

Low Japanese power demand

Despite warmer than average temperatures in the second half of June, power demand in Japan remained weak, according to power utility association FEPC.

Electricity generated and purchased from Japan’s ten main public electric utilities fell by 1.6% year on year in June, marking the third consecutive month of declining power demand, according to the industry body.

By the second week of July, traders were unable to identify any further August demand, nor a substantial up-tick in activity for September. On 11 July, the highest bid for both halves of September was recorded at $10.500/MMBtu, and the lowest offer at $11.000/MMBtu.

Instead, discussions turned firmly to the upcoming winter season, where demand projections were expected to be significantly stronger. By the start of July, indicative bids for November and December were reported at around $16.000/MMBtu, while the lowest offers were heard in the mid-$17.000/MMBtu range.

A string of cargoes was also understood to be marketed for the first quarter of 2015 at 14-15% Brent crude oil-indexation.

One factor contributing to the anticipated rise in prices is the potential ramp-up from September of Sinopec’s Qingdao terminal, which is expected to absorb incremental cargoes from the PNG LNG plant in addition to its 2mtpa contract.

The furthest forward EAX half-month contract, H1 October, was assessed at $11.500/MMBtu on Tuesday, standing at a $0.637/MMBtu premium over H2 September.

Despite the weakness of Asian prices, the premium of the EAX to the Northwest European Index (NEX) fell only by $0.352/MMBtu month on month, to $4.601/MMBtu on 15 July. A total of eight LNG tankers arrived in the UK in the second half of June and in the first half of August, including seven from Qatar. "

http://www.icis.com/press-releases/asian...ow-demand/

[jft310]

Palm - maybe Interoil will sell LNG into this 6 month out market at prices 50 percent higher than today. Oh that's right we have no LNG for sale today. What matters the price today or the long term contract price ? Just asking? Anyone who believes all those Australian LNG plants get built also believes in Santa Claus. If they were to get built then the banks would have seen long term contracts with a profit to cover the much higher costs than any PNG LNG project. The more of those Australian plants that get built the higher the margins for PNG gas . Build away boys. Let's see so taxes, labor costs they don't matter when pricing your product. Right? If they do then PNG wins big time.

[Palm]

What's this about Santa Clause?!! Something happen to him?

[jft310]

Christmas in July for the LNG market. Look at the prices. OMG!
Oh you don't want the gas today mr customer oh you want November gas to heat your home well that gas is 50 percent higher or do you want a cold house? Just asking.
If you want to guarantee a warm house for the next 20 years mr LNG supplier what's the price??
OMG it's the November price .

[sydbod]

 ......... Anyone who believes all those Australian LNG plants get built also believes in Santa Claus.......

Wow ... that impresses me .... maybe I better start believing in Santa Clause.

Let me see, 2 little LNG trains already having noticeable impact on prices.

Now off the top of my head

3 new LNG plants coming on line in QLD (APLNG , QCLNG, GLNG), over the next 2 years.

Darwin LNG (possibly 2 trains expansion).

A number of the gas deposits from the north west of West Australia are planning to be piped to existing plants and LNG trains expanded there. (looks like they are giving up on FLNG for most of the new projects)

Even PNGLNG expansion of 1 extra train more than likely.

These are all just expansions or soon completion of new plants, and IOC wants to build a Greenfield LNG plant and have not even proved up the resources fully yet to be able to start construction.

That is a huge amount of new LNG coming to market over the next 3 years, will the market grow by that amount or will the glut expand partially into even the peek usage periods.

I am not saying that it is over for IOC by any means, what I am saying is that the huge profits to be made out of LNG will probably decrease significantly (pencils will be sharpened) and we may have to prepare ourselves to downgrade our expectations of having a silver plated Mercedes rather than gold plated Mercedes in the future.

[jdeo1969]

Yet another reason I do not believe we will see a new plant built. It just makes better fiscal sense to use the existing infrastructure at png lng for all parties. Jmo.

[Palm]

"Energy consumption: The Asian Experience


With many countries in Asia witnessing furious economic growth, the demand for energy in the continent is rapidly rising. At present, the continent accounts for about 30% of the global energy demand. No doubt China and India’s economic growth stories had contributed immensely to the rise in energy demand at 5.5% and 6% respectively. While in developed countries, past experience of oil crises had resulted in an ethos of efficiency in energy consumption and cutting down on oil demand. Globally, the demand for oil is expected to increase at an average annual growth rate of 1%, and will in effect, remain the single largest energy source. Compared to world demand, in developing Asian countries, energy demand, particularly oil demand, is expected to grow much faster to cater for growth needs of countries like China, Japan, India, Vietnam, Thailand, Malaysia, Indonesia and other ASEAN countries. By 2017, China is seen to rank the highest in primary energy demand and by 2033 in primary oil demand. The trend is expected only to grow in the coming years, particularly, as both China and India, both countries with vast populations, are seen continuing the growth trajectory. Global oil demand consumed in the transport sector will peak in 2032, while global oil demand will almost peak around 2035 with more than 60% of this expected to come from the transport sector in Asia and the world."