DAEGU, South Korea Oct 14 The cost of
delivering U.S. gas to Asia will eventually rise as U.S.
production costs increase, erasing North America's price
advantage over other global suppliers of the fuel in its
liquefied form, an ExxonMobil executive said on Monday.
The development will disappoint Japan and other buyers who
are counting on bringing liquefied natural gas (LNG) to Asia at
Prices for U.S. natural gas are currently around $3.80 per
million British thermal units (mmBtu) compared with just over
$16 per mmBtu for LNG delivered into Asia.
"I think there is a misperception out there that with Henry
Hub sales from $3.50 we can land LNG in Asia for $11, $12 (per
million British thermal units)," Richard Guerrant, ExxonMobil's
global vice president for LNG, told the World Energy Congress in
"Over time the arbitrage is going to be consumed ... and you
can expect a convergence of prices."
U.S. natural gas prices are currently below replacement
costs because producers are drilling in areas rich in more
lucrative petroleum liquids, which subsidise the cost of
drilling for the cheaper gas, Guerrant said.
History indicates those low prices cannot be maintained over
the long term, he added.
"Since the gas produced from liquid-rich places is not
enough to meet long-term gas demand in North America, the U.S.
will eventually need to begin drilling dry gas places to support
domestic and export demand," he told the conference, held in the
city of Daegu, about 300 kilometres southeast of Seoul.
Export volumes from the U.S. to Asia may also be limited by
regulatory hurdles, Guerrant said, with only four projects
representing about 51 million tonnes of LNG a year having been
approved so far.
"There is still some uncertainty over the amount of exports
that U.S. will approve," he said.