* Asian spot LNG prices have already halved in 2014
* Slowing growth clashes with rising output
(Adds comment, detail on oil-linked LNG contracts)
By Jacob Gronholt-Pedersen
SINGAPORE, Dec 10 Asian liquefied natural gas
(LNG) prices are expected to fall by up to 30 percent in 2015,
according to a survey of analysts and consultants, as the market
enters a period of oversupply and the impact of lower oil prices
The explosive growth in LNG consumption seen in recent years
has stalled on cooling Asian economies and with a resumption of
nuclear energy and a greater use of coal in some markets.
At the same time new LNG production has been coming on
stream, meaning tight supply conditions that had been expected
to last until the end of the decade are ending more quickly.
"Demand is a lot weaker than we anticipated just six months
ago," said Gavin Thompson, head of Asia-Pacific gas and power at
consultancy Wood Mackenzie.
Asian spot LNG prices LNG-AS have more than halved since
the start of the year to below $10 per million British thermal
Average import prices into Japan, the world's top buyer, are
forecast to fall to about $11 per mmBtu next year, down from an
estimated $15.50 this year and $16.45 in 2013, if Brent crude
averages around $75 a barrel, according to David Hewitt, co-head
of global oil and gas equity research at Credit Suisse.
If Brent trades at $85 next year, the price could be $12.60
per mmBtu, Hewitt said.
Japanese prices are a benchmark for LNG in Asia, a region
which accounts for about 70 percent of global trade.
Gas prices will also respond to falling oil prices, which
have fallen 40 percent since June, because most gas prices in
the region are indexed to oil.
Others also changed their outlook. Consultancy Energy
Aspects cut its forecast for 2015 spot prices by $1.70 to $12.40
Asian demand shot up following the 2011 Fukushima disaster
as nuclear reactors were idled in Japan, while LNG costs under
long-term contracts was pushed up by oil prices.
But markets are changing. In South Korea, where some
reactors were shut due to a scandal over fake certificates,
most have restarted, displacing LNG, while coal-fired power
plants are also running at high capacity.
In Japan, a depressed economy is also limiting demand,
albeit at a high level, while weak demand is now also hitting
China as slower economic growth forces buyers to re-sell imports
on the global market.
LNG prices are also unlikely to top cheap low sulphur heavy
oil products that Japanese utilities can use instead of gas.
If Brent trades at $70 a barrel, the price of low sulphur
oil will cap LNG spot prices at $10.50 per mmBtu, Wood
Mackenzie's Thompson said.
With Asia's energy demand at its highest during the northern
hemisphere's winter months, and long-term contracts linked to
oil having a time lag of several months before being priced in,
the recent oil price drop will only kick in around the second
quarter of 2015.
"The link with oil prices is very strong ... This means that
despite increases in the share of spot volumes, average LNG
prices are still cointegrated with crude oil prices," said Mark
Agerton in a research paper for the Center for Energy Studies at
Rice University in the U.S. state of Texas, adding that it
estimated 73 percent of all LNG trades took place under
long-term contracts in 2013.
"The first quarter of 2015 could be the last hurrah for LNG
prices for a while. If Northeast Asia is mild again, then the
ramp up of prices could be really very subdued and will lead us
into a couple of years of oversupply," said Energy Aspects'
Trevor Sikorski with regards of the potential impact of winter
on gas prices.
Credit Suisse said around 5 million tonnes of supply will
come to market next year from Australia, 14 million tonnes less
than initially expected, due to delays.
"Buyers are relatively comfortable with delays and slower
ramp-ups, because they don't really want to take that gas now,"
(Additional reporting by Sarah McFarlane in LONDON; Editing by
Henning Gloystein and Ed Davies)