SEOUL/PERTH: Asia's biggest economies face paying twice as much for some natural gas as old supply deals are renewed, with a North American shale glut years from helping to meet soaring demand in the region.
Rocketing prices will add billions of dollars to the power bills of Asian nations and threaten competitiveness, but mean an earnings bonanza for LNG producers such as Malaysia's Petronas, BP and Australia's Woodside Petroleum.
Japan, South Korea, Taiwan and China bought 70 per cent of global liquefied natural gas supplies last year. They can spend five times as much for the super-chilled fuel as US buyers pay for piped gas.
While shale gas floods the United States, gas demand in Asia has outstripped supply, in part because the world's two largest buyers, Japan and South Korea, are buying more cargoes to make up for power lost from their crippled nuclear energy sectors.
And as decades-old Asian supply contracts come up for renegotiation, some producers are angling to double prices, a threat to economies heavily dependent on imported energy. That's got hard-pressed purchasers pushing to form a buyers' club to boost their bargaining power.
"We are importing energy with the money that we earn by selling semiconductors, steel and ships. As much as energy import costs rise, it will hit our international balance of payments as well as our economy," said Yang-hoon Sonn, President & CEO of state-run Korea Energy Economics Institute.
South Korea faces one of the most immediate price rises as it renegotiates contracts with suppliers in Malaysia, Yemen and Russia, which account for nearly a quarter of its gas imports.
Accepting that higher prices are inevitable, Korea Gas Corp (KOGAS), the world's largest corporate buyer of LNG, is now simply in a race to get a better deal than other importers in the region, company sources said.
LNG makes up around half of South Korea's energy bill of about 25 trillion won ($24 billion) a year, while only supplying a fifth of its power.
South Korea has LNG contracts for 7.5 million tonnes per year with Malaysia's Tiga LNG, Russia's Sakhalin, and Yemen LNG. When the deals were struck at the turn of the century, gas was cheap and still shedding its image as a by-product of oil production, often burned or "flared" on site.
LNG prices into Japan -- a benchmark for Asia -- were under $5 per million British thermal units (mmBtu) in 2000, compared with $19 per mmBtu on the spot market now . "It was a buyers' market in the early 2000s when we had signed the deals, " the KOGAS source told Reuters.
WAVE OF PRICE HIKES
Long-term LNG contract prices are typically calculated as a per centage of oil prices. Some contracts signed years ago were agreed at 10 per cent of the oil price or lower and have stuck sellers with prices far below the current spot market rate.
KOGAS has paid an average of $8.25 and $6.05 per million British thermal units (mmbtu) for Yemeni and Russian LNG, respectively, this year, a big discount to the average of $14.84 for overall purchases due to long term contracts locked in years ago with both suppliers.
Customs data show that South Korea paid $15.91 per mmBtu for Malaysian LNG in October, nearly double the $8.41 it paid last year, a jump mostly due to buying more supplies on the spot market, according to sources.
Japanese utilities are likely to face the same fate next year when prices on several supply contracts with Australia's Woodside Petroleum are renegotiated. LNG accounts for about 60 per cent of Japan's spending on thermal fuel for power generation while providing nearly 43 per cent of its electricity.
Woodside expects the prices it receives for LNG to move toward the Japanese average of around $15 per mmBtu. Some of its lowest priced contracts are around $8 per mmBtu, analysts say.
indiatimes.com
Rocketing prices will add billions of dollars to the power bills of Asian nations and threaten competitiveness, but mean an earnings bonanza for LNG producers such as Malaysia's Petronas, BP and Australia's Woodside Petroleum.
Japan, South Korea, Taiwan and China bought 70 per cent of global liquefied natural gas supplies last year. They can spend five times as much for the super-chilled fuel as US buyers pay for piped gas.
While shale gas floods the United States, gas demand in Asia has outstripped supply, in part because the world's two largest buyers, Japan and South Korea, are buying more cargoes to make up for power lost from their crippled nuclear energy sectors.
And as decades-old Asian supply contracts come up for renegotiation, some producers are angling to double prices, a threat to economies heavily dependent on imported energy. That's got hard-pressed purchasers pushing to form a buyers' club to boost their bargaining power.
"We are importing energy with the money that we earn by selling semiconductors, steel and ships. As much as energy import costs rise, it will hit our international balance of payments as well as our economy," said Yang-hoon Sonn, President & CEO of state-run Korea Energy Economics Institute.
South Korea faces one of the most immediate price rises as it renegotiates contracts with suppliers in Malaysia, Yemen and Russia, which account for nearly a quarter of its gas imports.
Accepting that higher prices are inevitable, Korea Gas Corp (KOGAS), the world's largest corporate buyer of LNG, is now simply in a race to get a better deal than other importers in the region, company sources said.
LNG makes up around half of South Korea's energy bill of about 25 trillion won ($24 billion) a year, while only supplying a fifth of its power.
South Korea has LNG contracts for 7.5 million tonnes per year with Malaysia's Tiga LNG, Russia's Sakhalin, and Yemen LNG. When the deals were struck at the turn of the century, gas was cheap and still shedding its image as a by-product of oil production, often burned or "flared" on site.
LNG prices into Japan -- a benchmark for Asia -- were under $5 per million British thermal units (mmBtu) in 2000, compared with $19 per mmBtu on the spot market now . "It was a buyers' market in the early 2000s when we had signed the deals, " the KOGAS source told Reuters.
WAVE OF PRICE HIKES
Long-term LNG contract prices are typically calculated as a per centage of oil prices. Some contracts signed years ago were agreed at 10 per cent of the oil price or lower and have stuck sellers with prices far below the current spot market rate.
KOGAS has paid an average of $8.25 and $6.05 per million British thermal units (mmbtu) for Yemeni and Russian LNG, respectively, this year, a big discount to the average of $14.84 for overall purchases due to long term contracts locked in years ago with both suppliers.
Customs data show that South Korea paid $15.91 per mmBtu for Malaysian LNG in October, nearly double the $8.41 it paid last year, a jump mostly due to buying more supplies on the spot market, according to sources.
Japanese utilities are likely to face the same fate next year when prices on several supply contracts with Australia's Woodside Petroleum are renegotiated. LNG accounts for about 60 per cent of Japan's spending on thermal fuel for power generation while providing nearly 43 per cent of its electricity.
Woodside expects the prices it receives for LNG to move toward the Japanese average of around $15 per mmBtu. Some of its lowest priced contracts are around $8 per mmBtu, analysts say.
indiatimes.com
No comments:
Post a Comment