March 16, 2012 / 5:05 PM / 8 years ago

Global LNG-Asian LNG prices inch toward $16/mmBtu

* Atlantic LNG price at $12/mmBtu on FOB basis

* High Atlantic prices reduce diversions to Asia-trader

By Rebekah Kebede and Oleg Vukmanovic

PERTH/LONDON, March 16 (Reuters) - Asian liquefied natural gas (LNG) spot prices rose slightly toward $16 per million British thermal units (mmBtu) LNG-AS this week as higher demand for the summer began to kick in.

Prices for LNG for delivery into Japan, the world’s largest LNG importer, were around $15.70 to $15.80 per mmBtu, according to market sources, with some expecting to see prices move up to $16 per mmBtu in the coming weeks.

Japan has begun restocking LNG in recent weeks ahead of the summer as it braces to handle peak demand with less than 5 percent of its nuclear capacity on line. The country has been depending heavily on LNG and crude to fill the power supply vacuum created by the loss of nuclear power.

The Japanese government wants to restart some of its nuclear reactors to avoid a potential power crunch in the peak summer season, with only two of 54 nuclear reactors currently generating electricity.

Public opinion has turned against atomic power since the tsunami-triggered nuclear crisis last year. According to a recent poll, a majority of Japanese oppose a restart of nuclear power plants currently shut for maintenance.

Japan’s 10 regional electricity utilities in February used 44 percent more gas than a year earlier to generate electricity to compensate for the record-low nuclear plant utilisation rate.

If Japanese ministers are able to facilitate the restart of two nuclear reactors after meetings later this month, Japan would reduce its LNG requirement by 2 million tonnes per year, according to Reuters calculations.

In South Korea, the world’s second-largest LNG importer, inventories were at 70 percent of storage capacity, slightly higher than year-ago levels, but buyers were thought to be still looking for cargoes for May.


Prices in the Atlantic Basin climbed to about $12 per mmBtu this week on a free-on-board basis, which excludes charter costs and insurance, two industry sources, a trader and producer, said.

The cost of delivering LNG from Trinidad to Argentina works out at about $13 per mmBtu, the producer said.

Argentina, which recently launched a tender for nine cargoes to fill its remaining 2012 requirement, however, has paid well above that level recently.

Rising shipping costs are also making diversions from Europe to Asia increasingly less profitable, leaving more LNG for domestic consumption as the number of diverted cargoes declines, the trader said.

“With the free-on-board price so high in the Atlantic (at $12/mmBtu), it is getting difficult to divert cargoes to Asia,” the trader said, because the price incentive is being eroded.

“As a result more LNG supply will stay in the Atlantic, which may mean that Europe will continue to receive deliveries at the current pace,” he added.

But the producer said Spain and Belgium were buying cargoes specifically for the purpose of re-exporting to higher-paying markets.

“The Spanish could be buying from us just so they can store the cargo and re-sell it to Asia at a later date,” the producer source said.

The current estimate for LNG volumes to be exported from Spanish and Belgian terminals in March is 225,000 metric tonnes, with four vessels from Spain and two from Belgium’s Zeebrugge port, according to data from Waterborne.

Re-directing Atlantic cargoes to Asia has become the focus of LNG trading activity in Europe since Asian prices soared in response to greater fuel demand from Japan. (Editing by Jane Baird)

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