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Global LNG-Asian LNG prices move higher on summer demand
June 10, 2011 / 10:55 AM / 7 years ago

Global LNG-Asian LNG prices move higher on summer demand

* Prices near $14 mmBtu

* Market eyes Japan nuclear capacity

By Rebekah Kebede and Edward McAllister

PERTH/NEW YORK, June 10 (Reuters) - Spot prices of liquefied natural gas (LNG) in Asia were seen closing in on $14.00 per million British thermal units (mmBtu) the highest seen in the spot market this year, from about $13.60 last week, on summer demand and sustained imports by Japan, traders said.

“Offers are clearly above $14.00 per mmBtu, but I haven’t seen any transactions at that level. I think for now we have reached a maximum price, but you never know,” one Asia-based trader said.

Asian LNG prices have already risen from below $10 per mmBtu before the quake to near $14 per mmBtu currently.

Japan continues to face serious shortfalls in electricity supply in the wake of the March tsunami, with Kansai Electric Power Co the latest major utility to call on buyers to cut power use to avoid rolling blackouts.

Kansai said it would need to buy fuel equivalent to 300,000 tonnes of LNG to meet summer power demand due to the uncertainty as to when it can restart the reactors. That would be on top of additional purchases of 1.3 million tonnes of LNG equivalent it has already bought.

But given the uncertainties in Japan’s power market, utilities in the country were seen buying just a few months out.

“They are not trying to buy too far ahead in any great quantities -- the way that they are doing it seems to be spot one or two months out,” another Asia-based trader said.

The market is also closely watching actions surrounding nuclear closures in Japan and the effect on LNG markets, following a statement by government officials earlier in the week that local opposition could shut down the nation’s nuclear capacity.

“The LNG markets are put under further strain by the possible shutdown of all of Japan’s nuclear power by a government driven by public fears about the risks of nuclear power,” said Pan Eurasian LNG analysts in Raleigh, North Carolina.

Any further growth in Japanese demand will tighten the Asian LNG market, which is expecting several new importers to come online in the next few years.

NEW LNG TERMINALS

Thailand will start operations at its regasification plant in July after a successful test run.

Thailand is just one of several Asian nations including Singapore, Indonesia, Malaysia, Pakistan, Bangladesh, Vietnam and possibly Sri Lanka and the Philippines that are expected to become LNG importers in the next few years, adding to rapidly growing Asian demand for the supercooled fuel.

The rise in Asian spot prices has increased the premium to UK benchmark prices in recent weeks, enough to attract Atlantic Basin cargoes east, if shippers can find scarce spare tonnage. British futures were around $9.60 per mmBtu on Friday, up slightly from last Friday, but still more than $4 below Asian prices.

U.S. gas futures at $4.70 per mmBtu NGc1 on Friday were almost $4.90 below British prices and remained the least attractive market for LNG shipments.<0#NG-NGLNM=R>

Last week, deliveries of LNG to the United States and Canada were at 0.7 billion cubic feet per day, down from the 1.2 bcfd average in 2010, Tudor Pickering Holt numbers showed, a sign of low prices deterring spot shipments.

El Paso’s Gulf LNG terminal in Mississippi will receive its first commissioning cargo on June 13, joining the ranks of idle terminals on the U.S. Gulf Coast thanks to low prices.

The first two commissioning cargoes will be delivered by BG Group, the first arriving on June 13 from Trinidad, and the second from Egypt on June 27, El Paso told Reuters on Wednesday. Beyond that though, the terminal is not likely to receive many cargoes, analysts say. [ID: nN08240884]

In South America, Argentina’s new Escobar terminal was officially opened this week -- the second in the country -- with the arrival of its first commercial cargo in the SCF Arctic tanker. The Arctic Spirit tanker from Qatar, delivered by Morgan Stanley, is also anchored nearby and ready to offload a second cargo.

While Argentina is receiving regular deliveries, Brazil remains quiet, a noticeable change from the record deliveries seen last year.

For a table showing LNG tankers heading to Northwest Europe, click here:

For tankers heading to the US, click here: (Editing by Ramthan Hussain)

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