(Sept 15): Liquefied natural gas (LNG) buyers are accelerating discussions to buy more fuel from the US as the Iran war and turmoil over the Strait of Hormuz forces them to seek alternatives to suppliers in the Middle East.
Companies in Thailand, Pakistan and Bangladesh are in talks to sign long-term contracts with US suppliers, officials said at the Gastech conference in Bangkok. China Gas Holdings Ltd signed a rare sales agreement this week from US exporter Venture Global Inc scheduled to start in 2030, despite tensions between Washington and Beijing.
The move comes as disruption to Hormuz — through which about a fifth of all LNG flowed before the war — enter a seventh month and Qatar’s massive export terminal remains largely offline after being damaged by missile strikes. The loss of supply from Qatar and the United Arab Emirates to key Asian customers, coupled by high spot prices, is lifting utility bills and triggering energy shortages across parts of Asia.
“Buyers around the world really are more focused on diversifying their LNG procurement,” Yukio Kani, the chairman of Jera Co, one of the world’s biggest LNG buyers, said on Bloomberg TV. “Some rely too much on Qatar, like more than 50% or 60%.”
Jera — Japan’s top gas importer — has spent the last decade diversifying its sources of supply and now depends on the Middle East for about 5% of its LNG, Kani said at the Gastech conference in Bangkok. It imports most of that through long-term contracts — a strategy that other nations should follow to reduce exposure to the volatile spot market, according to Kani.
Inpex Corp, the Japanese energy producer, is considering investing in an LNG export project in the US, chief executive officer Takayuki Ueda said in an interview. The flow of LNG through the strait, he said, “will not return to the previous status quo.”
“Diversification of our portfolio — in our words, portfolio resiliency — is important,” Ueda said.
To be sure, companies are looking beyond the US as well. Inpex is exploring projects in South America, Ueda said. Thai company officials at Gastech, meanwhile, showed interest in LNG from Canada and the Asia-Pacific.
US suppliers tend to offer among the lowest prices for longterm contracts, in part because the agreements are linked to the nation’s Henry Hub benchmark and vast shale reserves have kept domestic prices low. Shipments from the US under long-term contracts are being delivered to Asia at US$8 (RM32.41) per million British thermal units (MMBtu), according to officials at US and Japanese companies.
For comparison, LNG prices in the spot market for Asia are about US$30 per MMBtu as European and Asian buyers compete for a limited pool of supply.
However, the prices of some US contracts have increased, due in part to supply chain bottlenecks and a reaction to the current tightness in the market, according to company officials and traders. That, plus a general shift to reduce exposure to LNG, may act as a hurdle to any fast deals.
US supplies also have the flexibility to be delivered to both to Asia and Europe. This also means that a buyer can import US LNG shipments into their domestic market if there are requirements, or resell it if there is demand or more profitable places overseas.
New LNG supply from North America has replaced more than half of the Middle Eastern volumes lost from the global market this year, Cederic Cremers, Shell plc’s president of integrated gas, said on Monday.
The US is the world’s largest LNG exporter and is poised to roughly double exports by the end of the decade. ExxonMobil Holdings Corp expects US LNG to account for about 30% of global supply by 2030, senior vice president for LNG Peter Clarke said on Monday. Projects including Woodside Energy Plc’s Louisiana LNG and Cheniere Energy Inc expansions are currently marketing LNG supplies for delivery starting by around 2030.
“America wants to sell you gas,” James Danly, US Department of Energy deputy secretary, said during a panel at Gastech. “I’ve been yelling it from the rooftops.”
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