LNG Seen at Record as Demand Expands Five Times Pace of Supply

The price of liquefied natural gas in Asia is poised to reach a record in the next several months as the region’s buying surge helps demand capacity grow as much as five times faster than supply, Bank of America Corp. said.

The power and heating fuel may rise to $20 per million British thermal units during the northern hemisphere winter, exceeding February’s high, analysts including Shin Kim in New York said in an e-mailed report today. Spot prices in Asia climbed to $18.10 in the week to Nov. 11, according to an assessment by New York-based World Gas Intelligence.

Natural gas is superchilled into a liquid for transport by sea and then turned into gas again once delivered. Demand measured by growth in re-gasification terminals fuel will rise five times faster than new liquefaction capacity in 2014, having expanded three times quicker this year, the bank said.

“Global LNG markets are heading towards another tight year,” the report said. “The underlying problem in global LNG markets remains with LNG re-gasification capacity additions far outpacing liquefaction capacity growth.”

Costs rose to a record $19.40 on Feb. 4 and have advanced for the past 10 weeks, WGI data show.

Japan, the world’s biggest LNG importer, will raise its imports as much as 1 million metric tons to 87 million tons next year as nuclear generators remain offline, the bank said. China will boost its annual capacity to receive the fuel to 38 million tons, three times higher than in 2010, the bank said. Latin American imports, up 16 percent this year, will be supported by falling Argentinian gas output and delayed projects in Brazil, they said.

Supply Concern

“On the supply side, there is plenty to be concerned about,” the bank said. “Most new projects come on delayed, suffer from massive cost overruns and struggle with a shortage in skilled labor or feedgas issues.”

Angola’s new LNG plant is running below capacity after starting in the summer, 18 months behind schedule, the bank said. Algerian exports are down 6 percent after the new Skikda plant started in March, it said. Nigeria’s LNG exports are being curtailed and Egypt’s rising demand leaves less for export, according to Bank of America.

“We do not see any material improvements to supply until 2015 when major projects in Australia, and eventually the U.S., start to hit the market,” the bank said.

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