* Tight gas markets likely through 2014-2015
* Future U.S. LNG exports uncertain
* Asia price structure may change if U.S. exports rise
By Rebekah Kebede
KUALA LUMPUR, June 8 Global liquefied natural
gas markets will tighten and prices likely increase over the
next two to three years as supplies rise more slowly than
appetite from a growing number of importers, industry leaders
said at an event this week.
Consumers will pay the price for delays to investment
decisions during the global financial crisis, with few new
projects scheduled to start exporting until 2015.
"We do think the market will be tight in the medium term. It
will be 2015 at the earliest before you see material new supply
coming into the market and even those are exposed to the risk of
delay," De La Rey Venter, Shell's head of global LNG, told
reporters at a global gas conference in Malaysia's capital Kuala
Any delays would mean LNG markets stay tighter for longer,
Venter said, making it harder for buyers to find the spot
cargoes they need to meet additional fuel demand.
Australia will supply the next round of gas to the LNG
market from 2014 onward and is set to overtake top exporter
Qatar in 2017. But several of those projects are the first of
their kind - including three to export coal-bed methane from the
country's east coast.
The challenges that come with breaking new ground will be
expensive, said Didier Houssin, director of energy markets and
security at the Paris-based International Energy Agency (IEA).
"These projects will be more than twice as costly as the
previous generation of LNG plants, this means that this new gas
supply will not be cheap," he said.
SUPPLY WILD CARD: NORTH AMERICA
Consumers are eyeing North America, awash with supply due to
the rapid increase in shale gas output. There are at least 12
projects to export gas from North America at different stages of
development, but only one has full export approval.
U.S. developers are eager to export the vast gas supplies
unlocked from shale as they could achieve higher prices for
sales abroad. U.S. prices have dropped to around $2.40 per
million British thermal units (mmBtu), a fraction of the
$18 per mmBtu price in the Asian spot market .
The Sabine Pass LNG project, to be developed by Cheniere
Energy, will be the first of its kind in the United States in 50
years. But there is debate in the United States around export
policy and the government is under pressure to keep enough
supply at home for industry and prevent price
Peter Oosterman, president of Fluor's energy and
chemicals group, said he is not very bullish on the possibility
of LNG exports from the U.S.
"The U.S. still needs to decide if they want to export and
if so how much and when. If you're ready to export and you
decide today, it's still four years before you have a facility
up and running," he said.
Qatar's RasGas was unconcerned about the United States
eating into the market Qatar dominates.
"Outside of the Sabine Pass, LNG exports may well be
limited... The U.S. is also a country in need of energy, so I
can't see the U.S. being a major exporter of LNG," said Hamad Al
Mohannadi, managing director of RasGas said.
"I think (U.S. supplies) will be on the spot market from
time to time, but is it going to be a secure supply?" Mohannadi
questioned, adding that it would be a "big gamble" for consumers
to bet that U.S. gas prices would remain cheap.
NO VIABLE PRICE ALTERNATIVE?
The debate continued on how any flow of U.S. LNG exports,
priced against the U.S. Henry Hub gas benchmark, would change
the oil-linked pricing structure in Asia.
Gas consumers in Asia typically express concern about paying
oil-related prices when there is wide divergence between gas and
crude. While U.S. gas prices were in the doldrums, oil
hit its highest level since 2008 in March at over $128 a barrel
and Asian LNG prices are still much higher than U.S. gas prices.
The difference between oil and gas fundamentals would make
buyers reluctant to pay oil-related prices as more LNG exports
flow, some executives said.
"They should really insist on a gas-on-gas price," Cheniere
Energy CEO Charif Souki said.
Cheniere has struck long-term deals to supply South Korea
and India from Sabine Pass LNG at Henry Hub-linked prices.
Within five years, a gas-linked market for LNG is likely to
develop, Souki said.
But other gas developers say they need oil-indexed prices to
finance the huge expense of building LNG projects.
"I don't fundamentally see that we'll move away from the oil
linking because the people who were taking that huge upfront
risk to both discover the resource and build it... they need to
have some assurance that it's going to be on some basis that
they can make those huge investments," said Peter Coleman, CEO
of Woodside Petroleum, which operates most of
Australia's LNG capacity.