LNG imports unlikely to make up for lost Gulf production: analyst

Washington (Platts)--11Oct2005

While the US may wish to turn to liquefied natural gas imports
to make up for hurricane-related shut-ins of domestic production, those
additional imports "may not necessarily be forthcoming," Cambridge Energy
Research Associates said Tuesday.
     "To attract LNG cargoes to US shores, a US buyer must pay a
competitive price, including a premium to account for additional shipping
distance," Robert Ineson, CERA North American gas analyst, said in a new
analysis. 
     Moreover, Ineson said the increased US demand for LNG "comes
during a period of limited extra supply availability." Global LNG supplies
have been in high demand for the past 18 months, "leaving numerous ships idle
and receiving terminals operating below full capacity," the analyst said.
     Ineson said Spain, which has the third-largest LNG market worldwide,
became a significant competitor for LNG cargoes in 2005 and could remain so in
the coming months, depending on that country's winter LNG needs. Current
Spanish electricity prices are insufficient to lure more LNG cargoes into the
country, though a demand surge could alter that dynamic, the analyst
explained.
     The UK also could prove a strong competitor for LNG cargoes in the
Atlantic Basin, particularly during the 2006 first quarter when "the normal
winter seasonal premium in the UK" could produce higher prices there
than in the US, CERA said.
     The high-demand Asia-Pacific region will likely prove another strong
competitor for cargoes this winter, particularly since low hydro levels and
nuclear issues in Japan "are exacerbating the tightness" in the region, CERA
noted.
     Ultimately, the amount of incremental LNG imports making their way to
US shores "will depend on cargo availability and the relative strength of
US natural gas prices as we move through the winter season," Ineson said.
"Based on current forward prices, additional cargoes should be moving to the
US in the fourth quarter; for subsequent months, the jury is still out," CERA
said.
                                    ---Melanie Tatum, melanie_tatum@platts.com

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