Record gas prices in Asia reduce LNG investment; N. America grabs exports

SINGAPORE / NEW YORK / BENGALURU, Oct 7 (Reuters) – Some of the world’s largest importers of liquefied natural gas (LNG) are slashing orders after a 500-year price hike, raising concerns among potential producers about the potential longevity. -Destruction of demand term.

While LNG buyers, along with numerous emerging economies in Asia, are putting pressure on prices that have doubled in the past month, the growing number of exporters in North America is pushing for increased export capacity that will still take many years to come online.

Natural gas is seen as a more acceptable fossil fuel because growing economies such as India, China and Pakistan have sought to reduce carbon emissions, as they burn more cleanly than oil and coal. But rising natural gas prices are pushing electricity suppliers back to coal and fuel oil and leading to a rethink of new LNG investments in Southeast Asia, which was expected to be the center of LNG demand growth.

World gas price benchmarks are at record or multi-year highs
World gas price benchmarks are at record or multi-year highs
In Asia, which accounts for 70% of global LNG imports, most long-term contracts are related to oil. But South Asian countries like India, Pakistan and Bangladesh – which together account for 20% of Asia’s imports – are more in touch with LNG prices, which are currently at a record high of 50 million British thermal units (mmBtu). .

This has raised concerns among developers in Southeast Asia, as analysts say plans for new LNG regasification terminals may now be delayed after high LNG prices and government budgets are boosted by the costly Kovid-19 outbreak, a source familiar with the negotiations said.

“There is a lot of pressure on new buyers to justify signing contracts at these prices, so they are slow to make progress in the discussion,” the source said, noting that enthusiasm among potential buyers has waned. Years ago. Due to the sensitive nature of the deals, he declined to give further details or name.

For large US export terminal operators, rising prices were initially welcome. However, cost volatility makes it difficult and frustrating to sign additional long-term agreements, as they know they will only be able to add increased export capacity next year.

Anatole Fagin said, “We didn’t like low and flat prices everywhere in the world around $ 2 per mmBtu a year ago and I’m not sure what I don’t like now with higher prices.” , Chief Commercial Officer at Cheneyer Energy Inc. (LNG.A), the largest LNG exporter in the United States. “It’s a revelation that the market isn’t good enough to invest by bicycle.”

Fagin said Chenier would soon decide on an additional expansion at the Corpus Christi LNG export plant in Texas, noting that global prices are tailwinds for the company compared to lower U.S. prices.

U.S. benchmark gas prices are currently at a seven-year high, but $ 6 per million British thermal units, far from Asian and European levels. The United States has the capacity to convert only 10.5 billion cubic feet per day (bcfd) of gas into LNG – about 10% of the gas it emits.

Natural gas prices in Europe and Asia have risen in recent weeks as importers have struggled to transport liquefied natural gas (LNG) to meet electricity needs.

Global markets will have to wait until the end of this year to get more from the United States, when Chenier’s Sabin Pass and Venture Global LNG are expected to start production of LNG in the sixth liquefaction train test mode at its Calcasiau Pass in Louisiana.

After that, the world will have to wait even longer for additional US or Canadian projects. Houston-based Telurian Inc. (TELL.O), which announced three long-term agreements to sell LNG to units of Royal Dutch Shell PLC (RDSa.L), Vitol SA and Gunvor Group, is expected to start production of LNG. As early as late 2025, executive chairman Charif Souki said.

In British Columbia, LNG Canada is not expected to be in service until around 2025. In addition, a number of proposed projects between 2019 and 2020 were closed due to persistently low prices.

Disclaimer: The views, suggestions, and opinions expressed here are the sole responsibility of the experts. No The Money Circles journalist was involved in the writing and production of this article.

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