Buyers in Japan and Korea, the world's largest LNG
consumers, are expected to benefit most from potential US
exports of LNG, according to a new report released
the report from Moody's Investors Service titled "The
Prospect of US LNG Exports Influences Pricing and Gas Markets
Worldwide", analysts expect Asian buyers to reap benefits
from newfound supply.
"Buyers in Japan and Korea will have widening supply
options, in addition to new supplies from Australia," said
Mihoko Manabe, vice president and senior credit officer for
Moody's. "They will benefit from the increased quantity and
diversity of their gas supply, as well as a stronger
negotiating position when signing up to new contracts."
Examples of the buyers likely to benefit include Tokyo
Electric Power (Tepco) and Korea Gas.
Sectors that will face greater competition from the US LNG
exports include the Australian LNG producers, who will need to
compete harder for future projects to supply their targeted
Asian buyers. These include Woodside Petroleum and BHP
Billiton, according to the report.
In addition, European gas wholesalers face
ongoing pressure from increased supply in the short-term gas
market, which reduces spot prices and squeezes margins.
Moody's said it does not expect US LNG exports to be a
ratings-changer for most of the players involved. With the
highly visible exception of Sabine Pass Liquefaction, LNG will
remain the domain of big, highly rated companies, and expensive
LNG export facilities take several years to
Sales will continue to be made under decades-long agreements,
allowing players to adjust to shifts in market conditions
In the US, 20 applications to export LNG await US Department
of Energy (DOE) approval. Moody's expects at most four of these
projects to be built.
Mostly likely to move forward are those positioned near the top
of the DOE's list for approval, as well as projects in
brownfield locations, which have a cost advantage, because they
already come with some necessary infrastructure. For the most
part, those that move forward will be backed by companies with
investment-grade balance sheets and substantial experience in
the LNG business.
Moody's expects US LNG exports to be minor during this
decade, as the Sabine Pass LNG export project is expected to
begin operations in 2015, with others to be completed in
Most Canadian exports will not start until after 2020, says
Moody's. In Canada, three projects have requisite government
approvals, but have yet to secure the commercial agreements and
pipeline infrastructure needed to move forward.
The new exports will mainly target Asia, and compete
directly against rising production from Australia, which has projects under construction that will be adding
enough export capacity between 2014 and 2017, overtaking Qatar
as the largest LNG producer.
On the demand side, Moody's expects Japan to remain by far
the largest importer of LNG, accounting for roughly a third of
the global LNG market. South Korea will hold steady as the
second-largest importer, while China will ramp up its imports
almost to the level of Korea's by 2020.