The LNG market today

The T&T minister of energy propaganda insists that the price of LNG in Asia is presently high enough to offset the loss of revenue arising from the fall in oil prices. But the talking heads of Atlantic state publicly that its LNG goes to primarily Latin America, Asia, Europe. There are no long term contracts for the sale of LNG to users in Latin America and Asia and the prices received are way above that of US henry hub prices. Why then does the gas price used for national budgets reflect the low prices of US henry hub? Is it because of the reality that the taxation of trains 1 to 3 at Atlantic are set at US henry hub prices and there is no contingency in the contract to allow T&T to tax the wealth derived from LNG sold outside of the US? Is the windfall not being shared by the people of T&T? At present the LNG markets in Japan and South Korea are being impacted by LNG purchased and held in storage because of lower demand in these markets which will impact demand into the first quarter of 2015. As a result prices are falling because of lower demand and increased supply and supply is carded to increase in 2015 as plants in Australia come online. The major reality to impact LNG demand in Asia in 2015 is Japan’s commitment to re-start some of its idled nuclear generating capacity. The decision to idle its nuclear plants came at a high price to the Japanese economy given the high prices it was forced to pay for LNG to feed its power generating plants. The future then points to the search for alternate energy sources in Asia unless LNG prices reflect demand realities in Asia and the alternate suppliers are lining up. The major LNG buyers in Latin America are Brazil and Argentina and the levels of demand in both countries are impacted by specific realities. At present Argentina has product delivered stored in LNG tankers offshore because quantities purchased outstripped demand. Again suppliers to these markets are lining up especially from the US and by 2016 if not sooner the incursions will begin. The reality then is that product produced at Atlantic is predominantly sold via tender bids won for a single load or multiple loads within a fixed time frame. Production planning is then now entirely different to the days of long-term contracts and the question is: where does gas curtailment fit into this new scenario? Are we as a nation extracting the maximum possible benefit from LNG export production given the rapidly changing nature of the supply side of the LNG market? Readers can check my book: “The geo-politics of LNG in Trinidad and Tobago and Venezuela in the 21st century”

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