Global LNG-Japan tsunami bullish for Asia LNG spot market

PERTH, March 11 Fri Mar 11, 2011 9:06am EST

PERTH, March 11 (Reuters) - The Asian spot market for liquefied natural gas was bracing for a spike in demand from Japan, the world's largest LNG buyer, after the nation was hit by a record-setting earthquake and tsunami on Friday afternoon.

"It's bullish news for the LNG market. It's much too early to get an idea of (how much), but Japan will have to turn to more spot LNG cargoes," Tony Regan, an analyst with Tri-Zen Capital in Singapore said.

The biggest earthquake to hit Japan on record struck the northeast coast, triggering a 10-metre tsunami that pounded the port of Sendai in northern Japan, where an Shinminato LNG terminal is located.

The full impact of the quake on Japan's power generation and LNG infrastructure was unclear late Friday, and Sendai City's gas department, which owns the Shinminato LNG terminal, could not be reached for comment.

"We're eagerly waiting to see what Monday brings," one Asia-based trader said.

"(Buyers) haven't asked about any incremental cargoes or any additional demand, it being Friday afternoon. We probably won't hear about any additional demand for cargoes until early next week when everybody assesses what kind of damage was taken by power plants and LNG infrastructure."

A single LNG terminal outage is unlikely to have a major impact, with Japan's numerous LNG terminals likely able to compensate.

Four of Japan's nuclear plants were temporarily shut due to the quake, with a heightened state of alert declared near the Fukushima Daiichi nuclear plant.

"If one of (the nuclear plants) has been damaged by the earthquake, it could be out for a couple of years," Tri-Zen's Regan said, adding that such a long-term outage could ramp up LNG demand significantly and boost prices in the spot market.

Traders said that Japanese utilities may try to cover increased demand through existing long-term LNG supply contracts.

"There's plenty of long-term suppliers into Japan that might have had a similar situation before. The buyer and the seller would probably have a discussion and see what's available," another Asia-based trade source said.

"You'll obviously see some impact on prices because if things need to be unwound from Europe or whichever market they were going to, then it's going to be more costly."

The quake arrived at a period of otherwise slackening demand in the Pacific Basin as winter draws to a close in the northern hemisphere.

Spot prices had remained in the range of $9.50 to $10 per million British thermal units for the last two weeks, but bids were reported to be gaining on the news of the quake.

LNG demand was also revving up in the Middle East as the hottest months of the year, typically March through October, when air conditioning use boosts energy demand, traders and analysts said.

In the United States, Gulf Coast re-exports were set to resume in April after a brief hiatus. Two Sabine Pass re-exports have been recently mentioned for April loading, as well as a re-export from Cameron LNG. (Additional reporting by Risa Maeda in Tokyo; Editing by Randy Fabi)

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