The Providence Journal (New Zealand): Hot market in Asia consuming greater share of liquefied gas. Energy companies are scrambling to increase inventories as world demand for LNG soars. “However, on Thursday, a consortium led by Royal Dutch/Shell Group that is developing gas reserves off Russia's Sakhalin Island said in Moscow that it had struck a $6-billion deal to supply LNG to North America.”: “Shell, which is building the Energia Costa Azul terminal near Ensenada in Baja California with Sempra Energy, is the buyer of the gas.” (ShellNews.net)
01:00 AM EDT on Sunday, October 17, 2004
Asia's shortage of liquefied natural gas used by power plants is driving up prices and prompting producers such as Nigeria and Trinidad to redirect supply earmarked for the United States before the start of winter.
Asia's inventories of LNG fell faster than expected after an unusually hot summer in South Korea, Japan and Taiwan caused a surge in use of the fuel to power air conditioners, delegates to the Gas AustralAsia Pacific 2004 conference in Perth, Australia, were told last week.
"The Asian spot market is very tight," said Park Jae Young, a manager in the LNG trading team at Korea Gas Corp., the world's biggest buyer of the fuel. "We need to build up inventories to meet winter demand and we are intercepting cargoes that were originally intended for other regions."
The direction of global LNG shipments shifted two months ago, said Andy Flower, a United Kingdom-based independent LNG consultant.
In the three months ended July 31, Australia, Malaysia and the Middle East sent 13 cargoes to the United States, totaling 740,000 metric tons, Flower said. In August, at least seven cargoes, or 350,000 tons, were delivered from Nigeria, Trinidad and possibly Spain to Northeast Asia, he said.
"There has been a big switch-around between the early part of the northern summer and the last couple of months," Flower said. "Korea Gas and the Japanese utilities are building stocks, which have been depleted during the summer. If the winter is cold, then they will be in the market for more LNG."
However, on Thursday, a consortium led by Royal Dutch/Shell Group that is developing gas reserves off Russia's Sakhalin Island said in Moscow that it had struck a $6-billion deal to supply LNG to North America.
Sakhalin Energy Investment Ltd., operator of the Sakhalin-2 project, said it signed an agreement to ship 40.7 million tons of LNG to a regasification terminal in Mexico. Shell, which is building the Energia Costa Azul terminal near Ensenada in Baja California with Sempra Energy, is the buyer of the gas.
The deal is the first that would funnel Russian LNG to the United States.
In addition, BP PLC, Europe's biggest oil company, and partners in Indonesia's Tangguh LNG project will start to deliver as much as 3.7 million metric tons to to the planned terminal in 2008, Indonesia's oil and gas regulator BPMigas said in a statement.
BP and San Diego-based Sempra signed the 20-year sale contract in California on Thursday, the statement said.
BP also signed a lease-option deal last week with the Port of Galveston, Texas, giving the company three years to conduct environmental-impact and economic feasibility studies on 185-acre Pelican Island, on the north side of the Galveston Channel, for a receiving terminal and regasification plant.
BP plans to build a $600-million project that would unload imported LNG from ships and convert it into 1.2 billion cubic feet of natural gas each day. Before it can move forward, BP must win myriad permits for everything from air quality to marine impact.
Elsewhere, Egypt agreed last week to send its first tanker of LNG to Europe in December, as the nation drives to increase oil and gas exports with rising demand for energy pushing prices to their highest level in decades.
A first shipment of 600,000 metric tons will leave the Spanish Egyptian Gas Co. liquefaction plant around Dec. 10, bound for Spain. The plant will start production in November.
Natural gas demand in Spain more than tripled in the past decade, as more customers join the pipeline network and power plants are built that rely on the fuel. Spain has no significant natural gas reserves of its own, and so must import supplies.
Japan and South Korea are the two largest LNG importers in the world. Asian demand for LNG, mostly burned in power stations, rose 9.3 percent last year to 82.8 million tons, according to BP's Annual Statistical Review of World Energy.
Japan imported spot LNG cargoes from Nigeria and Trinidad this year to meet increased demand after nuclear reactors were shut down for safety inspections and summer temperatures rose.
Taiwan's imports may more than double by 2010, while South Korea's imports are projected to rise almost 90 percent by 2015, to 33 million tons, from their 2002 levels, the Australian government's commodities forecaster said in June.
Unless Korea Gas signs more multiyear purchase contracts, it may have to buy more LNG in the spot market, the forecaster said.
Global LNG trade could more than double to 280 million tons a year by 2010, requiring the industry to build four or five new production lines a year, David Maxwell, a director of Woodside Petroleum Ltd.'s gas business unit, said in Houston.