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LNG: Low natural gas prices stall Asian demand for North American exports
Published: Monday, February 2, 2015
Falling demand for liquefied natural gas in Asia could halt exports from North America and Australia as LNG prices mimic diminished oil production prices.
Countries like China had begun examining LNG as a viable alternative to coal for electricity production and diesel fuel in transportation.
Prices went down just as 60 million tons of LNG was expected to appear on the market during the next two years, the largest such new supply since Qatar's output during 2007-08. The decrease also hurt near-term returns on recently built plants in Australia and North America.
"There is so much uncertainty in the market as to where crude is going in the next one or two years that it's going to be very hard to find a comfortable [LNG] price mechanism that both the buyer and seller can agree on," said David Hewitt, managing director and co-head of oil research at Credit Suisse. "I think there are going to be an awful lot of flights between negotiating sellers in Australia and buyers in Japan, South Korea and Taiwan."
Several costly LNG projects in Australia and North America stalled as a result, and talk of exporting North American natural gas has almost disappeared as the price gap between North America and Asia narrows (Eric Yep, Wall Street Journal, Jan. 30). — KS