* Petronet appetite for Australian LNG dependent on pricing
* Asian buyers looking for increased flexibility
By Rebekah Kebede
PERTH, Nov 24 The Asian liquefied natural gas
spot market will likely expand as buyers wary of long-term
contract pricing look for more flexibility, an executive at
India's Petronet LNG Ltd (PLNG.BO) said on Wednesday.
"Indian and Asian LNG markets are lagging - most of the LNG
which is sold in Asian markets is long term (but) eventually,
the trend will change and Asian buyers will look for more
flexibility," said Anil Joshi, senior vice-president of major
projects and business development at Petronet.
While spot trade made up 20 percent of the worldwide LNG
market last year, Asian buyers made up only 4 to 6 percent,
The fact that many long-term LNG contracts are priced
against the Japan crude cocktail C-JP-JCC is a key motivator
for more buyers to move towards more short-term contracts or
even towards buying spot cargoes.
"The thing which is in the back of the mind of every LNG
buyer is that if the market decouples with oil, then he would be
left with a long contract which is totally linked with oil,"
Petronet is moving away from long-term contracts to supply
part of its 2.5 million tonne Kochi LNG terminal, with a 1.5
million tonnes long-term contract with Exxon Mobil (XOM.N) and
leaving the balance open to shorter-term arrangements, including
LNG FOR INDIA
Natural gas is expected to grow from 10 percent of India's
energy supply currently to 24 to 28 percent in 2025 and India
will be on the market to fill some of that demand with imported
However, Australia, which is a major supplier of LNG to
other Asian countries, and hopes to become the second-largest
LNG producer by 2015, may not be Petronet's first choice.
"Australia has a very high construction cost. Buyers
definitely like to buy from a project that can give them an
affordable price," Joshi said. "If the price is high, then the
market cannot take it."
Petronet's new Kochi terminal will be supplied in part by
Exxon Mobil's Gorgon project located in northwest Australia.
Most Australian projects now under construction or in the
pipeline are already seen as expensive, at a cost of between $6
and $8 per million British thermal units (mmBtu), while most
non-Australian projects cost less than $6 per mmBtu, according
to the Australian Petroleum Production & Exploration
Meanwhile, Indian domestic gas produced by Reliance priced
at just over $4 per mmBtu, Joshi said.
The arrival of the United States on the LNG export scene as
it attempts to find a home for its plentiful gas supply from
unconventional gas production, may help drive down prices in the
higher-priced Asian LNG market.[ID:nSGE6AL0QX]
"(It's) good for an energy deficit country like India,"