LONDON: Asian liquefied natural gas (LNG) prices rose toward record highs this week as fresh production outages in Norway and project delays in Angola threatened another year of constrained fuel supplies, while demand from South America and Asia continued to march higher.
Spot prices in Asia for March delivery topped four-year highs at $19.50 per million British thermal units (mmBtu), due to a combination of tight supplies and growing demand from new and established LNG importing countries. Prices last week were just below $19/mmBtu.
The start-up of Angola’s first liquefaction plant has been delayed until the second quarter of 2013, developer Chevron said in its annual financial results on Friday. The plant was initially expected to begin production in Q1 2012. Angola LNG was expected to provide a much needed boost to global LNG supplies this year, after an unprecedented drop in production last year, but analysts say repeated start-up delays now make that increasingly unlikely.
Norway’s Snoehvit LNG plant, Europe’s only production facility, will shut down for three weeks from the end of January, operator Statoil said, while Egypt and Indonesia are expected to export even less this year due to domestic gas shortages. In contrast to reduced supplies, LNG demand is expected to grow this year.
“I would say the price drivers remain tight supply and high demand from new importers outside of long term contracts, primarily South America but I believe Thailand’s PTT has tendered recently (for supply) and PetroChina is buying too,” a trade source said.
India’s state-led gas firm Gail is said to have lined up several spot shipments into its Dabhol terminal following a recent tender, while Mexico is also in the market for spot cargoes, the source said.
In Europe, Turkey is sucking up cargoes to meet elevated demand due to cold weather and inadequate pipeline deliveries, several sources said. “(French gas company) GDF is currently taking a re-load there on the Excelerate (a gas tanker),” the first source added.
Although tight supplies have helped drive prices higher, traders expect prices to ease back in April with the onset of milder weather and reduced demand for gas-fired heating. Asian LNG prices for April delivery are discounted by several dollars compared with March, one trader said.
The recent lifting of force majeure at Nigeria’s Bonny Island production plant has also raised hopes that the country will be able to offer spare volumes on the spot market, relieving supply tightness further. “Personally I remain sceptical about the depth of very high pricing. It would only take three or four cargoes to fill Japan’s demand to end-March, (South Korean state-owned gas firm) Kogas is pretty well covered and with any luck the weather will be warmer soon,” a trader said.
South Korea, the world’s second largest LNG importer after Japan, ramped up imports late last year in order to replace lost nuclear output due to unplanned reactor outages, but those plants have returned to service, reducing LNG demand.
In Europe, British gas prices moved higher as the system was left short by lower flows from UK gas fields, fewer imports and less LNG, while colder weather will drive demand for heating, traders said. In the US, gas futures seesawed on either side of unchanged early on Friday, with a slight bias to the upside as expectations for stronger heating demand added support amid another burst of cold in the eastern half of the country.