LNG Prices Set to Spike as Supply Falls

by Ship & Bunker News Team
Tuesday January 22, 2013

The price of liquefied natural gas (LNG) is set to spike to its highest point ever this year as demand rises, but LNG output in 2012 made an unexpected drop last year, according to Reuters.

Demand for the fuel is rising rapidly, driven by factors such as economic growth in Asia, Japan's substitution of gas for nuclear power in the wake of the Fukushima disaster, and a drought in Brazil that has forced the country to buy emergency fuel.

But LNG production for 2013 is expected to grow only marginally.

"The supply situation is worse than we thought it would be," said independent LNG analyst Andy Flower.

"LNG production declined last year and it doesn't look as though it will increase by much this year."

In 2012, the world's top LNG exporter, Qatar, reduced its exports for maintenance reasons, while unrest in Yemen stopped exports from that nation and rising domestic demand cut exports from Egypt and Indonesia.

LNG supply is expected to surge in the second half of this decade when new projects in Australia, Africa, and the United States are complete, but in 2013 only one major project is scheduled to come online, an Angola plant with a 5.2 million tonne per year (mtpa) capacity.

According to one source, declines in domestic production will also reduce LNG from Indonesia by almost 14 percent in 2013.

With as much as 80 percent of global LNG supplies said to be locked up under long-term contracts, the projected jump in price this year will be particularly hard on countries that rely on short-term deals, including Brazil, Argentina, China, and India.

A number of nations, including Singapore, Sweden, and Pakistan have recently announced plans for new LNG import terminals, with developers arguing the fuel is both less polluting and cheaper than other energy sources.