Liquefied natural gas demand in Asia is poised to rise for a second year in 2011, signaling a rebound in spot prices for the fuel after a 32 percent drop in November. The region’s imports may increase by 5 percent this year, after jumping almost 12 percent in 2010 and falling 2.9 percent the previous year, according to Sook Ching Wong and Alexis Aik of FACTS Global Energy, a Singapore-based energy consultant. Japan, the world’s biggest LNG buyer, paid $9.40 per million British thermal units for deliveries in November, compared with about $14 a year earlier, according to Japanese customs data.
Asian nations are boosting imports to meet rising demand from consumers and manufacturers just as colder-than-normal weather in Europe and plant shutdowns from Nigeria to Norway curtail supplies. Japan’s purchases rose about 10 percent to 63 million metric tons in the first 11 months of 2010 from a year earlier and South Korea’s climbed 30 percent to 29.3 million tons, according to customs data.
“Demand for spot LNG in Asia this winter will remain healthy and prices will reflect this,” said Maria Bitri, a London-based analyst with Clarkson Plc, the world’s largest shipbroker. “We are seeing quite significant activity in the spot market.”
U.K. benchmark front-month gas, used to price shipments for immediate delivery, jumped 81 percent to 62.95 pence per therm last year at the National Balancing Point, equivalent to $9.80 per million Btu. That’s a premium of about 4 percent to what Japan paid in November, compared with a 123 percent discount in the November-to-February period of 2009.
U.K. gas rose 1.2 percent today to 57.5 pence a therm as of 12:45 p.m. London time, according to broker prices on Bloomberg.
‘High’ Supplies
LNG supplies to the U.K. are “high,” Raleigh, North Carolina-based Pan EurAsian Enterprises Inc. said in an e-mailed note today. Eleven ships were expected to have reached the country in the first 11 days of this month, carrying 985,000 tons, it said. That compares with 1.6 million tons imported in December.
“The market’s tightening as buyers realize supply is getting tighter because of demand from the U.K. and Europe,” said Tony Regan, an LNG analyst at Trizen International Ltd. in Singapore. “A cold winter could result in deals in the $10-$11 range before perhaps coming off again in spring.”
Rising demand for LNG, which is gas chilled to a liquid for transport by ship, may help ease a global glut of the fuel as import capacity is added in emerging economies in China, India, Brazil and Argentina, Bank of America Merrill Lynch said in an Oct. 25 report. Worldwide shipments increased by more than 20 percent in the first half of last year, the bank said.
South Korea Shipments
South Korea may receive at least 11 spot cargoes of the fuel in December and January, including a shipment on BP Plc’s British Innovator, due to arrive on Jan. 7, according to vessel- tracking data. The country got 18 cargoes from the Atlantic Ocean area in the same period last year, according to customs data.
Stavanger-based Statoil ASA, Norway’s biggest oil and gas producer, aims to resume production at its Snohvit LNG plant in Hammerfest in the second half of January, Ola Anders Skaubya, a company spokesman, said on Jan. 3. Nigeria LNG Ltd., which has the capacity to meet about 12 percent of world demand, said Dec. 31 it had reopened its plant after idling it since Dec. 22 because of a power outage.
Competing With Europe
Korea Gas Corp., the biggest individual buyer, and Tokyo Gas Co. are competing with European utilities for LNG amid colder-than-normal weather in both regions. Japanese temperatures dropped to 4 degrees Celsius (39 Fahrenheit) on Dec. 30, compared with an average 9.9 Celsius for December, according to CustomWeather Inc. Temperatures averaged 1.4 degrees Celsius in London last month, compared with a mean 5.7 Celsius in the previous five years.
Asian LNG imports may total 126.6 million tons in 2010, rising to 133.6 million this year, FACTS said in a Dec. 22 research note. Chinese shipments alone may climb 50 percent this year, after a 60 percent increase in 2010, it said.
“China’s where the upside comes from and the Middle East is another interesting one,” said Frank Harris, head of global LNG at Edinburgh-based Wood Mackenzie Consultants.
Britain, an entry point for gas to nearby parts of continental Europe, imported about 659 billion cubic feet last year from 357 billion in 2009 and 29 billion in 2008, according to the note by Pan EurAsian Enterprises. The U.K. sent out a record 77.3 billion cubic feet of the fuel in December because of cold weather, the U.S. energy consultant said.
“There is quite a competition with Europe, where the colder weather is also boosting demand,” Clarkson’s Bitri said.
Sellers typically price spot LNG off U.K. benchmark futures, forcing utilities in Asia to pay a premium over National Balancing Point prices to attract cargoes, according to Regan, a former fuel trader at Royal Dutch Shell Plc.