* UK next winter gas price to hit 90 pence/therm
* Asian LNG prices to hit $18/mmBtu this summer
* European LNG supply to fall over coming months
LONDON, March 8 Britain risks a total
cut-off in liquefied natural gas (LNG) supply next winter as the
world's biggest producer Qatar skirts Europe in favour of more
lucrative exports to Asia, Merrill Lynch Bank of America
analysts said in a research note on Thursday.
With Asian demand surging, mass diversions could trigger
severe gas shortages in the UK and set wholesale gas prices
soaring some 25 percent to 90 pence per therm, the analysts
Britain's dependency on seaborne gas imports has grown in
the past two years, making up about a quarter of total supply in
2011 as North Sea reserves declined by 10 percent year on year.
"Unfortunately, this marginal source of gas supply (LNG) for
Europe is now also contracting," lead author Sabine Schels said
in the note.
"In fact, it is not implausible that UK LNG imports fall to
zero by the end of 2012 especially if none of Japan's nuclear
power plants are re-started this year," she said.
The UK became a net importer of gas for the first time in
2011, including pipeline imports from Norway, the Netherlands
and Belgium, as well as seaborne LNG.
Norway, which holds a 15-18 percent market share of UK gas
supply via sub-sea pipelines, is the country's biggest pipeline
The bank expects Asian LNG prices will bounce back to $18
per million British thermal units in the summer - about double
European prices - supported by strong demand as Japan continues
to face nuclear outages and China and India raise imports.
Europe will be powerless to compete for cargoes given the
steep price premium in Asia, the note said.
"Qatar has consciously sent tankers to Asia which provides
better netbacks (prices), thus increasing the risk of gas
shortages in Europe," it said.
With demand rising strongly in key consuming countries like
Japan, China and Korea, and with Indonesia and Malaysia joining
the club of LNG importers, we estimate that UK LNG imports could
fall below 25 mcm/d over the next few months, the bank said.
That will lead to significantly higher gas prices next
winter, when demand peaks, it said.
At the same time Merrill Lynch expects European gas demand
to rebound in 2012, despite predicting a second eurozone
recession in the same timeframe.
European gas demand declined nearly 10 percent last year
partly because funding difficulties arising from euro zone debt
fears idled large swathes of industrial capacity.
JAPAN REACTORS OFFLINE
sustained surge in Japanese gas demand this year forms the
backbone of the bank's analysis, counting on a prolonged outage
period being imposed on the country's nuclear reactors amid
stiff opposition to reopening idled plants.
Japan's reactor meltdowns at the Fukushima nuclear plant
triggered by a deadly earthquake and tsunami on March 11 last
year shook the nuclear world and raised a question mark over
whether atomic energy is safe to rely on.
All of the country's 54 reactors are expected to be off line
by the end of April. Japan turned to LNG imports to replace
electricity it generated from nuclear power, importing a record
78.4 million tons of LNG in 2011, up 12 percent over the
"However, if none of the capacity was to be re-started, a
serious risk, Japanese LNG import demand could increase by a
total of 11.0 million mt to 89.4 million mt in 2012," the note