* Unconventional supply saps U.S. interest in LNG imports
* China a growth spot in global natural gas markets
* Industry still prefers long-term contracts
By Eileen O'Grady
HOUSTON, March 10 A glut of unconventional
natural gas supplies from U.S. shale deposits has fundamentally
recast the long-term prospects for liquefied natural gas
imports that were once considered the linchpin of the nation's
energy security, industry executives said on Wednesday.
A recession-driven fall in global natural gas demand saw
spot LNG prices tumble last year to around $4 per mmBtu from
record highs of around $22 in 2008.
With no immediate rebound in worldwide energy demand in
sight, major players in the global LNG market are focused on
"There's little hope in 2010 or 2011 that the oversupply
and low prices will disappear," but the prospects for 2012 and
beyond are brighter, Jean-Francois Cirelli, vice chairman of
France's GDF Suez GSZ.PA told the CERAWeek conference in
For graphic showing U.S. natural gas and oil prices click here:
The dip in natural gas prices has sent global natural gas
producers scrambling to change their plans.
Russian gas giant Gazprom (GAZP.MM) and partners last month
delayed first LNG shipments from the giant Arctic Shtokman LNG
output by three years to 2017, citing "changes in the market
situation and particularly in the LNG market."
Shtokman LNG, whose main target market is the United
States, has had to adjust to a new reality in which the U.S. --
once considered to be big growth LNG market -- does not need
incremental LNG supplies for the foreseeable future.
U.S. natural gas reserves are up by a third since 2006,
thanks to unconventional gas development including shale gas,
with estimated reserves sufficient to supply the U.S. market
for nearly 100 years at current rates.
After 2012, executives said they expected demand to swell
and prices to improve as the flexibility and climate-friendly
attributes of natural gas propel it to the forefront for power
generation in a world. First-ever U.S. regulations of carbon
dioxide emissions could make natural gas a more attractive
source for power generation.
One bright spot on the horizon is China, which has been
building natural gas pipeline and import terminals at a break
Forecasters have low-balled China's demand for natural gas,
according to Philippe Boisseau, president of gas and power and
French energy giant Total (TOTF.PA).
China currently has over a dozen LNG import terminals under
construction and has changed its pricing policies to attract
more imports, Boisseau said.
Attractive low LNG prices currently have created demand for
gas from a number of new countries not seen as LNG customers in
the past, such as Chile and Turkey, which purchased LNG from
RasGas last year, said Hamad Rashid Al Mohannadi, managing
director of Qatar's RasGas.
Spot pricing of LNG cargoes, while favored by buyers, will
be incorporated in more LNG contracts going forward, but will
not replace the traditional long-term contracts tied to oil
prices used in Europe, executives said.
However, many industrial buyers prefer the certainty of
long-term contracts benchmarked to oil prices, which have been
the industry standard for decades.
"Our suppliers want to keep the oil-indexed and long-term
contracts," said Cirelli at GDF Suez.
(Editing by Marguerita Choy)