Spot LNG prices surge to record highs: Report
Saturday, September 17 2005 - 12:47 AM WIB
An LNG cargo to be delivered into the US was reported sold last week at a record high of $US9.50 per million British thermal units (mmBtu), reflecting a surge in US gas prices after the hurricane slashed output in the Gulf of Mexico.
Most LNG is sold on long-term contracts, but the spot market is growing as producers look to respond more quickly to changes in demand and surges in gas prices.
The LNG plant problems mean between 22 and 24 cargoes have been lost in the August-September period, or nearly 1.6 million tonnes of LNG, said industry newsletter Waterborne LNG.
Japanese utilities are reported to be willing to pay $US12-$US13 mmBtu, about double the price they paid for cargoes in July as they look to replace cargoes from Australia.
"Japanese buyers are, for the first time this year, showing a serious need for spot LNG," said Waterborne LNG.
Australian oil and gas producer Woodside said it would lose nine cargoes because of the closure of one of its four North West Shelf processing trains.
Most of these shipments were due to go to South Korean and Japanese customers.
"Japan has nuclear problems and hydro is down. Even burning gas at $US12 in an efficient power station is better than burning oil," said independent analyst Andrew Flower.
According to Waterborne LNG, five cargoes were lost in August from Trinidad, where LNG output was reduced for maintenance and repair work.
Nigeria's LNG plant shut in late August after a leak on its main supply pipeline and is due to reopen next week although industry sources say this would be delayed until late September.
About 10-12 cargoes have been lost because of the problems in Nigeria, the newsletter said.
In Egypt, the new SEGAS plant is reported to have been shut for three weeks maintenance. The plant opened in January but has yet to reach its design capacity of 5.3 million tonnes a year because of teething problems, industry sources say.
A global price is emerging for short-term LNG trades, based mainly on prices in the liquid UK and US gas markets and on those in Spain, an increasingly important European LNG consumer.
The problem for Asian buyers is that there is no reference price in their region, so their purchases are based on European and US prices, with allowance for freight costs.(*)