Global LNG-Asia spot steady, demand slows as spring nears

PERTH Fri Feb 25, 2011 4:16pm IST

PERTH Feb 25 (Reuters) - Asian spot prices of liquefied natural gas (LNG) held steady this week, hovering at the $10 per million British thermal unit (mmBtu) mark in a very thinly traded market.

"There are little pockets of demand for the second half of March and April, but nothing dramatic at the moment. It's looking pretty stable in terms of pricing," one Singapore-based trade source said.

The onset of spring in top LNG consumers Japan, South Korea, and Taiwan has kept spot demand relatively low, sources said. Japan will see mostly warmer-than-average weather this summer, Japan's forecaster said this week.

"The spot market is in a transition period from the winter to the spring. There are some buyers who are looking for spot LNG, but most of the shopping has already been done," one Japan-based trade source said.

Some importing countries may also have considerable stockpiles of the fuel.

"February has been a very warm month as well in Asia, so you will see the inventory levels have been quite sustainable," another Singapore-based trade source said.

Taiwan was still in the market for cargoes, with its tender for parcels from March through June, due to close soon, trade sources said.

The warmer weather may be causing U.S. re-exports of LNG to wane, with only one re-export during February and none are expected in March, Waterborne LNG analysts said in a note this week.

"The U.S. Gulf Coast, which has witnessed a flurry of re-export activity during this winter, seems to be on hiatus," Waterborne said, adding that a lack of available LNG tankers may be an additional reason for the drop in re-exports.

The spread between U.S. and British prices -- which helps determine the flow of LNG in the Atlantic -- was just above $4.80 per mmBtu in favour of Britain on Friday, up from $4.60 last week, Reuters data showed. <0#NG-NGLNM=R>

SOUTH AMERICAN DEMAND

In a sign of growing South American demand for LNG, Argentina's state energy company said the nation could double its LNG imports in 2011 to between 45 and 50 cargoes.

A joint regasification plant supplying Uruguay and Argentina should start operations in January 2013, Uruguayan President Jose Mujica said this week. The plant would process 10 million cubic metres of natural gas per day.

Asia will continue to be the world's top consuming region for natural gas, but is likely to increase its share of the supplies it consumes to two-thirds, up from 50-55 percent currently, a senior analyst at Credit Suisse said this week.

China is expected to be a major contributor to that demand and on Friday one of the state's energy companies, Sinopec, clinched the second-largest single Chinese LNG deal, agreeing to buy 4.3 million tonnes of LNG per year starting 2015 from Australia Pacific LNG.

China's LNG imports for January rose 4.8 percent from a year earlier, but fell short of December's volumes, a record 1.03 million tonnes of the super-chilled fuel, the data showed.

India, also expected to represent a major part of Asia's LNG demand growth, may more than double 2010 import levels to 20 million tonnes by 2017. (Editing by Ramthan Hussain)

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