West Coast market provides export opportunity for Asian LNG producers: BP

Severe natural gas shortage in the United States will provide an opportunity for Indonesia and other Far East LNG producers to boost export of the commodity to this market.

?Piped gas supply is no longer adequate to supply the US gas demand which grew rapidly due to sustained low price in the late nineties; providing incentive for industry to shift to gas use. This year alone, LNG import is expected to double to 1.2 billion cubic feet per day (BCFD), versus 600 million standard cubic feet per day (MMCFD) last year. LNG import volume will reach 2.5 BCFD in the next two or three years, which is the country?s current LNG receiving terminals capacity,? said Michael Smith, head of energy analysis of Anglo-American energy giant BP Plc on Monday.

Smith said in 2010, when LNG receiving terminal in the west coast of the US and Mexico commenced operations, LNG import will reach 4-5 BCFD or around 35 million tones per annum.

He said the opening of west coast market would create opportunity for Far East LNG producers such as Indonesia, Malaysia and Australia to penetrate into the market despite the relatively long distance compared to Atlantic and Middle East producers.

?Demand pattern for Far East LNG buyers such as Japan, Korea is heavy in winter times and low in summer, thus creating idle capacity during summers. US market penetration would somewhat create the balance as US demand tend to be stronger in summer. That is an opportunity for Far East LNG producers to make use of their idle capacities,? said Smith.

Smith said despite the long distance between Far East and West Coast, Far East LNG could still be competitive if CIF price did not fall below US$ 3.5 per MMBTU.

He, however, said that LNG producers must be ready for price volatility in the US market and should not expect contracts to be sealed in long term.

Meanwhile, Smith predicted that excess supply capacity would still linger in Asia Pacific market the next five years Asia-Pacific LNG with the emergence of new producers and weak demand growth in Japan.

?The outlook of Japan economy is not very bright, and I only see modest growth in Korea and Taiwan and the emergence of India as new consumer. But that won?t be able to absorb the additional capacity of new LNG producers,? he said. (alex)