Asian Gas Market Change May Affect Prices in 5 Years, Qatar Says

Global natural gas markets may see “structural changes” in five to 10 years that affect the prices Qatar can negotiate for its liquefied natural gas, the emirate’s economic planning agency said.

Some buyers in Japan, the world’s biggest LNG user, are seeking to link contract prices to spot markets, Frank Harrigan, director of the department of economic development at the General Secretariat for Development Planning, told reporters in Doha yesterday.

Qatar, the world’s biggest LNG producer, sells most of its LNG through long-term contracts linked to oil prices. The emirate has sought to defend oil-indexed pricing, a system that buyers in Europe and Asia have sought to undermine because of natural gas’s widening discount to oil on exchange.

“In Asia, what we are seeing is some localities trying to develop liquid markets in gas,” Harrigan said. “We already see some Japanese purchasers looking to negotiate contracts in which prices are linked to shorter-term spot prices.”

On an energy equivalent basis, Brent crude futures in London averaged seven times more this year than Henry Hub natural gas traded in the U.S., where a surge in domestic production from shale rock has kept prices low. Oil was almost twice the average price of U.K. gas this year.

Edison SpA of Italy won an arbitration case against Qatar’s Ras Laffan Liquefied Natural Gas Co., known as RasGas, earlier this year over oil-linked pricing. Poland should try to reduce the price paid to Qatar for LNG under a 20-year contract, the eastern European nation’s Treasury Minister Mikolaj Budzanowski said Oct. 8.

Singapore Hub

Kansai Electric Power Co. (9503), Japan’s second-largest utility, said Nov. 19 it will buy LNG using U.S. Henry Hub futures for the first time.

Singapore, Asia’s biggest center for oil trading, said Oct. 24 it will build a fourth LNG tank to meet growing demand and take advantage of increased spot trading. Royal Dutch Shell Plc (RDSA) plans to move its natural-gas business to Singapore from The Hague in response to growing demand for the fuel in Asia.

Qatar’s General Secretariat for Development Planning, an agency directly under the authority of the country’s crown prince Sheikh Tamim Bin Hamad Al Thani and independent of the government, issues regular forecasts for the emirates economy.

To contact the reporter on this story: Robert Tuttle in Doha at rtuttle@bloomberg.net

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net

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