Bloomberg: U.S. LNG Supplies Decline Because of Demand From Asia, Europe

By Dinakar Sethuraman

Jan. 9 (Bloomberg) — Liquefied natural gas supplies to the U.S. have declined in recent months because Asian and European customers are paying higher prices to meet demand for the fuel, the U.S. energy bureau said.

U.S. LNG imports have fallen from a record 3 billion cubic feet a day in the spring to less than 1 billion in subsequent months, the U.S. Energy Department said in its Short-Term Energy Outlook January 2008, without being more specific about the timing of the drop. Imports fell to 0.9 billion feet a day in December from 1.7 billion a year earlier, Stacy Nieuwoudt, an analyst at Tudor, Pickering, Holt & Co. Securities, Inc., said in a separate report yesterday.

“The latest decline in LNG imports to the United States has been caused by the combination of increased demand and higher natural gas prices in other markets around the world, including Asia and Europe,” the department said in the report, posted on its Web site yesterday.

Prices of the fuel have climbed since an accident in March at a Tokyo Electric Power Co. nuclear plant increased demand for LNG to run gas-fired generators, with Taiwan paying Indonesia a record $14 a million British thermal units for LNG in November.

That contrasts with the average natural gas spot price at Henry Hub, a U.S. gas trading point, of $7.17 per thousand cubic feet in 2007, or $6.96 per million British thermal units. Henry Hub is expected to average $7.78 in 2008 and $7.92 in 2009, the U.S. energy bureau said. The price is expected to average above $8 in both January and February.

Projected Imports

Imports of LNG into the U.S. rose an estimated 34 percent to 781 billion cubic feet in 2007, the bureau said. Annual import volumes are projected to reach about 937 billion cubic feet this year and 1,179 billion in 2009, respectively.

U.S. natural gas consumption may have increased by 6 percent in 2007, the bureau said. Forecasts of near-average weather in 2008 and 2009 may pare the increase in projected demand to 0.6 percent and 1 percent, respectively, for those two years.

The U.S. was the world’s fourth-biggest LNG importer in 2006 behind Japan, South Korea and Spain, according to the BP Statistical Review of World Energy. Supplies of LNG to The U.S. are led by BG Group Plc, BP Plc and Royal Dutch Shell Plc.

LNG is natural gas that has been chilled to liquid form, reducing it to one-six-hundredth of its original volume at minus 161 degrees Celsius (minus 259 Fahrenheit), for transportation by ship to destinations not connected by pipeline. On arrival, it’s turned back into gas for distribution to power plants, factories and households.

To contact the reporter on this story: Dinakar Sethuraman in Singapore at [email protected]

Last Updated: January 9, 2008 02:09 EST

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