US LNG imports drop on Asia, Europe competition

Friday, 25 January 2008

Some Atlantic Basin cargoes continued to be diverted to Asia, especially Japan and China, for premium prices and Spain was the main destination in Europe.


With European natural gas prices around $10 per million British thermal units since the start of 2008 and comparable US prices at between $7.50 per MMBtu and $8.00 per MMBtu, the US has remained the destination of last resort for diverted LNG.


US LNG imports mostly entered the country at Everett LNG terminal, Massachusetts from Atlantic LNG in Trinidad, as Asia remained the main attraction for sellers.


BG Group of the UK has been one of the main sellers of diverted LNG cargoes during the Northern Hemisphere winter, analysts said.


The four US terminals at Everett, at Elba Island, Georgia, at Cove Point, Maryland, and at Lake Charles, Louisiana, have used just over half of their sendout capacity because of much lower cargo volumes.


January LNG import numbers will raise further concerns in the US, where three new terminals come into service this year, that the nation will struggle to compete for extra cargoes amid a global shortage of LNG and price competition.


According to the US Energy Information Administration, total LNG imports in 2007 were more than 781 billion cubic feet, a 34 percent increase over the previous year.


The import volume in 2007 varied significantly throughout the year. The highest daily receipts of over 3 Bcf occurred in the spring and the lowest daily receipts of less than 1 Bcf occurred in recent months.


Annual US LNG import volumes are projected to reach about 937 Bcf and 1,179 Bcf in 2008 and 2009, respectively.


However, the EIA forecast is already being viewed as over optiomistic. The signs are that the US could emerge as a market for diverted cargoes in the spring and summer.


The US natural gas price curve into 2008 is around the $8 per MMbtu maximum level, pointing to Atlantic Basin arbitrage opportunities later in the year.