Price rout threatens to delay Liquid Natural Gas terminals, like the Mozambican

(2015-06-02) New liquefied natural gas (LNG) export terminals risk delays after prices for the chilled fuel fell to five-year lows in Asia and Europe, according to the American Gas Association (AGA).

US facilities approved or those close to final consent would proceed because they had purchase accords and investors, Dave McCurdy, the president of AGA, said early last week.

US plants not yet approved might be delayed after a price rout, as well as higher build and regulatory costs, while international projects, including Mozambique LNG, could be postponed, he said.

“Those that are in the queue may have a harder time negotiating a firm contract at this stage,” McCurdy said, as the US takes over the presidency of the International Gas Union for the next three years at the World Gas Conference that started today in Paris.

“Global pricing has a major impact right now.”

LNG prices to Asia, the biggest consuming region, plunged 40 percent in the past year amid oil’s biggest slump since 2008 and as new production plants from Papua New Guinea to Australia come online. Producers from Royal Dutch Shell to Petroliam Nasional and BG Group delayed spending on LNG projects from the Pacific to North America in the past six months.

Slowing demand also damped prices, while the US shale boom was turning the nation into an exporter, McCurdy said. His group represents more than 200 energy companies including Sempra Energy and Iberdrola’s US unit.

Global gas-demand growth fell for a second year in 2014, according to the International Centre for Natural Gas Information in Paris.

The US will start LNG exports from Cheniere Energy’s Sabine Pass plant at the end of the year. Four other major plants have received final approval for worldwide exports, with 47 applications filed, according to the Department of Energy.

Morgan Stanley said last month that no more than six major US LNG export projects would be completed.

Mozambique LNG has said it had a target of 2018 for bringing natural gas to the market. The project did not respond to an e-mail sent on Friday seeking comment.

The prospect of LNG exports from the US was already affecting the negotiation and renegotiation of contracts “because all of a sudden there is competition”, McCurdy said. Unlike most traditional supply accords, US LNG contracts have no ties to specific destinations and are linked to prices at the Henry Hub delivery point.

Spot LNG in north-east Asia has slid 23 percent this year, according to World Gas Intelligence in New York. US gas has fallen 42 percent in the past year.

Source: Bloomberg

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