Japan's Fukushima disaster, with the subsequent shutdown of most Japanese nuclear power plants, mean US exports of liquefied natural gas (LNG) to Asia will be profitable to 2020 – but maybe not beyond.
That was the consensus of experts speaking to the US Energy Information Administration's (EIA) International Natural Gas Workshop in Washington, DC recently.
They see US LNG exports as initially profitable, but current Asian prices as unsustainable and see changes coming in Asia's traditional pricing method for natural gas.
Asian LNG contracts link gas prices to a basket of crude oils imported into Japan. With world oil prices persistently above historical norms, the linkage means Asian customers often pay five times US prices for their gas. US domestic prices are currently depressed due to ample shale gas supply and decreased demand, so the potential profit margin for exports appears substantial.
Asian buyers are already seeking cheaper US alternatives. Sovereign wealth funds from China and Singapore have invested in the first federally-permitted large US liquefaction plant, Cheniere Energy's $5.6 billion Sabine Pass, and Japanese, South Korean, and Indian buyers have signed up for output.
Robert Smith of Facts Global Energy in Singapore said Asian LNG demand grew 16.5% in 2011 due to Fukushima, and he thinks Japan will restart only about half of the nuclear capacity that, before March 2011, supplied nearly a third of the nation's electricity.
"You can't overstate the effects of Fukushima on the LNG market.
Even when Japan restores nuclear capacity.
That was the consensus of experts speaking to the US Energy Information Administration's (EIA) International Natural Gas Workshop in Washington, DC recently.
They see US LNG exports as initially profitable, but current Asian prices as unsustainable and see changes coming in Asia's traditional pricing method for natural gas.
Asian LNG contracts link gas prices to a basket of crude oils imported into Japan. With world oil prices persistently above historical norms, the linkage means Asian customers often pay five times US prices for their gas. US domestic prices are currently depressed due to ample shale gas supply and decreased demand, so the potential profit margin for exports appears substantial.
Asian buyers are already seeking cheaper US alternatives. Sovereign wealth funds from China and Singapore have invested in the first federally-permitted large US liquefaction plant, Cheniere Energy's $5.6 billion Sabine Pass, and Japanese, South Korean, and Indian buyers have signed up for output.
Construction has just started there; first exports won't occur before 2015. More than a dozen other projects are under federal review, and they couldn't begin exporting before 2016.
You can't overstate the effects of Fukushima on the LNG market," - Schlesinger
Robert Smith of Facts Global Energy in Singapore said Asian LNG demand grew 16.5% in 2011 due to Fukushima, and he thinks Japan will restart only about half of the nuclear capacity that, before March 2011, supplied nearly a third of the nation's electricity.
"You can't overstate the effects of Fukushima on the LNG market.
Even when Japan restores nuclear capacity.
No comments:
Post a Comment