Asia’s new LNG plants may boost regional demand


Asia's spot liquefied natural gas prices are steady at around $15/MMBtu this week, supported by strong regional demand and tight supply, Singapore-based traders said.

Long-term LNG prices, which are typically indexed against oil at a slope of around 15% of Brent crude plus a premium, are averaging over $17.00/MMBtu in line with strong oil prices, according to traders.

"[T]he start-up of new LNG import facilities in China, Singapore, Malaysia and South Korea may provide a boost for Asian spot prices as we move closer to the fourth quarter," JBC Energy research said earlier this week.

It said China alone is set to add three new import terminals with combined capacity of almost 10 million tons before the end of this year, taking the country's import capacity to more than 30 million tons.

The spot LNG market in Asia has been tight this year because of supply constraints. Algeria's Skikda and Angola's Luanda gas projects were the only new projects to start production, while higher gas output in Australia offset the decline in Indonesian gas exports.

"With no further liquefaction capacity additions scheduled until the second half of 2014, we expect global LNG supply to remain broadly unchanged in 2013," Barclays said in a note.

The bank expects four liquefaction projects--for exporting gas--to start next year with a combined capacity of 2.5 billion cubic feet/day, boosting LNG supply. However, regasification or import capacity growth next year is expected at 2.8 billion cubic feet/day, with all terminals but one located in Asia.

"The supply growth we project next year should be easily absorbed and we do not expect supply-demand balances to loosen significantly," Barclays said.

Japan and Korea, the world's largest LNG importers, roughly account for half of the global LNG demand and are expected to continue pulling the bulk of LNG cargoes as their nuclear power plants remain offline.

North Asian LNG markets will also move from the current post-summer season to peak winter demand, which is generally bullish for LNG prices.

However, given that LNG prices failed to surge despite unexpected supply shortages and a recent heat wave this year, peak winter demand may also fail to boost LNG premiums.

"Asian demand is peaking right now, but the added weather stimulus is coming too late in the season to produce a large-scale buying panic in the already tepid market," PIRA Energy said in a recent report.

Dow Jones Newswires

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