Oil Report

Firm U.S. natgas prices seen boosting LNG imports

NEW YORK, May 8 (Reuters) - A 25-percent run-up in U.S. natural gas prices since mid-March has made the United States a more attractive destination for liquefied natural gas imports, according to a Houston-based consulting firm.

“For the first time in many months, the U.S. East Coast has emerged as a superior netback from Trinidad over most European markets. U.S. imports should experience a slow, steady increase through summer,” Waterborne Energy said in its latest report.

Waterborne Energy, a consulting firm that monitors the global flow of liquefied gases, estimates that U.S. imports of LNG should climb to about 43 billion cubic feet in June from about 36 bcf in both April and May. But that would still be about half of last June’s total when the United States took in about 88 bcf.

U.S. East Coast gas prices have climbed nearly 25 percent since mid-March to about $12 per mmBtu.

While gas prices in Britain and Spain are close to that level, it takes twice as long to deliver LNG from Trinidad, a major spot supplier, to Europe and costs about 30 cents more, making the trip to the United States more profitable.

Waterborne expects European imports of LNG to show signs of slowing later this month, while Far East demand should also taper off as heating needs slow in spring.

The company expects most of the increase in U.S. LNG imports to discharge at the Cove Point terminal in Maryland.

BP continues to be the main supplier of spot LNG from the Atlantic basin, offering between two and five cargoes per month.

So far in May, Waterborne said BP is believed to have sold 3 spot cargoes from Trinidad, one for Suez LNG for Freeport in Texas, one for delivery to Japan and one for Spain.

LNG is natural gas cooled to liquid form so it can be loaded on special tankers. The liquid is then delivered to receiving terminals where it is regasified and pumped into onshore pipelines.

U.S. LNG imports hit a record high 770 billion cubic feet last year, or about 2.1 bcf per day, but strong competition from Asia and Europe this winter saw volumes drop off sharply late last year and early in 2008.

So far this year, U.S. LNG imports have averaged less than 1 bcf per day, down sharply from a 2.36 bcf per day average for the same four months in 2007.

The U.S. Energy Information Administration expects imports of LNG to the United States this year to total about 580 bcf, but some industry experts expect the pace to be lower, noting ongoing nuclear problems in Japan, strong European demand next winter and delays at several liquefaction projects were likely to keep global supplies relatively tight.

“We now suspect that global supplies (of LNG) this winter will be in high demand with little to go around, thereby potentially setting the stage for record high prices in the Far East and Europe and a very thin U.S. import scenario,” Waterborne said in the report.

Both Europe and Asia are more dependent on LNG to meet heating and cooling demand and usually pay up for added supplies. The United States, one of the world’s largest natural gas producers, can fall back on domestic supplies, which are expected to be up nearly 5 percent this year. (Editing by John Picinich)