GlobalData: High Asia-Pacific LNG prices could soon erode

Although high LNG prices in the Asia-Pacific region are expected to persist in the near term, there are increasing signs they will erode as a result of rising Asia-Pacific LNG production, US exports, and the region’s diversification of energy supplies, according to a forecast from an analyst with research and consulting firm GlobalData.

However, James Hand, who serves as oil and gas analyst, believes a price crash would not harm the $19 billion Papua New Guinea LNG project led by ExxonMobil Corp., which started early production from the project’s first train in April (OGJ Online, Apr. 28, 2014). Its first shipment has since departed (OGJ Online, May 15, 2014).

“As well as a lower operating cost advantage, the PNG LNG project also has a close proximity to the major demand markets in East Asia, along with favorable fiscal terms offered by the government and a high probability of adding more liquefaction trains at very low additional costs,” said Hand.

GlobalData indicates the PNG LNG project holds gas accumulations of 9 tcf and is one of only two large-scale LNG projects, along with the Queensland Curtis LNG project in Australia, to begin production in the Asia-Pacific region this year.

Upstream production from the project will flow for 30 years, exported through 450 miles of pipeline to Port Moresby, where gas will be liquefied by two LNG trains and exported internationally at a rate of 6.9 million tonnes/year (tpy), said GlobalData.

The breakeven gas price of the project is $6.60/MMbtu, offering substantial cushioning from potential LNG price shocks once the facility comes online midyear.

“As LNG projects come onstream over the next 4-5 years, most notably from Australia, but also from the Middle East, Africa, and North America, the supply of LNG into Asia is expected to increase considerably. In fact, Australia is looking to become the world’s primary LNG exporter by the end of this decade, overtaking Qatar,” concluded Hand.

ExxonMobil previously said it expects Asian LNG demand to rise by 165%—to 370 million tpy—between 2010 and 2025.

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