LNG market to remain tight until 2018 in Asia

Boding well for InterOil…

UPDATE 1-High LNG prices threaten Asia demand growth
Tue Sep 20, 2011 6:18am EDT

* Prices could soon become problem for India buyers

* LNG supplies likely to remain tight until 2018

* Philippines hopes prices fall before it imports (New throughout)
By Randy Fabi

SINGAPORE, Sept 20 (Reuters) – Skyrocketing prices of liquefied natural gas (LNG) could soon cut into demand growth and delay import infrastructure projects in India, the Philippines and other Asian countries, industry executives said on Tuesday.

Asian spot LNG prices have surged to above $16 per million British thermal units (mmBtu) since the March 11 earthquake and tsunami in Japan, when prices stood around $10 per mmBtu. LNG-AS

“If the spot prices continue to rise the way they were going for the last few months, there will be some issues with customers,” R.K. Garg, finance director for Petronet LNG , told reporters at an industry conference in Singapore.

“We did not expect prices to go that high because of the Japan earthquake. We are hopeful it is only a matter of time for prices to run their course.”

Imports into Japan hit records in August as the world’s top importer continued to struggle with power generation after the quake knocked out a large portion of its nuclear power supply.


Japan’s unprecedented LNG demand, limited import infrastructure in Asia, and delays in Australian export projects are likely to keep supplies tight and prices high in the region until 2018, said Abdul Rahim Hashim, president of the Malaysian Gas Association.

India’s LNG import capacity is expected to surge to 47.5 million tonnes annually in 2015/16 and 62.5 mtpa in 2019/20, said Garg.

But India’s LNG demand is very cost-sensitive and imports are seen limited if prices stay at current levels, Garg said.

China’s appetite for LNG could also be affected if prices continue to rally since importers already lose billions of dollars a year due to government policy requiring the use of long-term contracts, said Stephen Thompson, Asia Pacific LNG manager for Poten & Partners.

Chinese LNG demand is expected to reach more than 30 million tonnes a year by 2015, and the nation is expected to surpass South Korea as the No. 2 LNG importer by around 2020.

In the Philippines, the government is hoping LNG prices will fall by the time it starts to import supplies, expected around 2016.

“Right now LNG prices are a bit on the high side because everyone is buying it, but perhaps four to five years from now it will level off a bit,” said Energy Undersecretary Jose Layug.

Top LNG exporter Qatar is boosting shipments to Asia, while fourth largest exporter Australia has more than $200 billion worth of LNG projects on the drawing board and aims to triple production to 60 million tonnes a year by 2020 to help meet Asian demand. (Editing by Rebekah Kebede and Clarence Fernandez)