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Asia LNG Price Unlikely to Fall for Five Years, Bernstein Says

Asian liquefied natural gas prices won’t fall below $13 to $14 per thousand cubic feet in the next five years as Europe will resume imports at that level, according to Sanford C. Bernstein.

European buyers will stop diverting cargoes at that price band as LNG imports to the region would then be able to compete with pipeline gas from OAO Gazprom (GAZP), Bernstein analysts led by Oswald Clint in London said in an e-mailed report today.

“Until 2020 at least, netbacks to the Gazprom price prevent Asian spot LNG falling meaningfully below $14,” Bernstein said. “This argument also exposes Gazprom’s European volumes to Asian LNG prices.”

European gas demand will rise on average 0.4 percent annually to 2025, while domestic production is predicted to fall by 6 percent a year in that period, increasing the need for imports, according to the report. Gazprom will benefit in the next five years with its prices of $11 to $12 per thousand cubic feet, according to Bernstein. LNG imports will begin to rise “aggressively” after 2018 with the start of cheaper supplies from the U.S., it said.

LNG imports to Europe have fallen 28 percent year-to-date, compared with the same period a year earlier, Bernstein said. Transportation costs for LNG from Europe to Asia are on average $2 to $3 per thousand cubic feet, meaning it will remain profitable for Europe to reexport LNG until 2017, according to Bernstein.

To contact the reporters on this story: Chou Hui Hong in Singapore at chong43@bloomberg.net; Anna Shiryaevskaya in Moscow at ashiryaevska@bloomberg.net

To contact the editors responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net; Lars Paulsson at lpaulsson@bloomberg.net

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