Wednesday, August 21, 2013

LNG Prices go ... EVEN HIGHER in Japan this summer

According to press reports, spot LNG import prices into Japan are reportedly back about US$16 per MMBTU (million BTUs) since May, as increased demand for summer electricity generation pushes up the prices.

South Korea also is now in a partial nuclear shutdown/suspension mode, because of safety concerns about faked certificates and suspect equipment, and this has further added to demand, together with extreme, protracted hot weather.

The $16 per MMBTU price is a 10% increase from the lows reached in springtime, but down from the nearly $20 peak reached in January/early February.  US Henry Hub gas prices in recent years have been between $2 and $4.  Add another $3 or $4 for liquefaction and transport, and the obvious question is why Japanese prices should ever exceed the $8-$10 range over the medium/long term?

This situation highlights the need for Japan to diversify its sources of LNG supply, and to take advantage of potential increased lower-priced natural gas availability all around the Pacific Rim (starting with the U.S. and Canada), if it is to manage a transition away from nuclear power.

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