further undermines pumper "thesis"
BP warns LNG contracts face not-so-perfect storm
MATT CHAMBERS: March 05, 2013
BP's chief economist has warned that existing long-term, oil-linked LNG price contracts underpinning Australia's LNG boom could come under pressure this decade as new Australian supplies move on to the market in the next few years.
If combined with other uncertain factors such as US exports and a Russian gas pipeline to China in the next couple of years, Asia could quickly find itself facing the same factors that led to a dramatic change in the way European gas was priced, BP chief economist Christof Ruhl said yesterday.
If that happened in Asia to the extent spot LNG prices were a lot cheaper than oil-linked prices, there would be pressure to redo contracts.
"If the Australian contracts are coming on and you have US exports at the same time and the global economic recovery is not too strong you will have a lot of LNG coming to Asia," Mr Ruhl said.
He said that if this combined with a Russian gas pipeline into China -- which is stalled over price negotiations but could become reality if falling oil prices hit Russian export revenue and force a compromise -- and deregulation of the Japanese power sector, prices and pricing systems would come under pressure.
"If that happens, and I'm not saying it will, you have the same line-up of factors that eroded the oil-linkage in Europe becoming active in Asia," Mr Ruhl said in Sydney yesterday.
"Clearly, the risks are more towards things changing than remaining the same."
Australian LNG suppliers are currently building $180 billion worth of LNG projects in a massive drive that will make the nation the world's biggest exporter of the fuel. They have underpinned their investment with long-term contracts linked to the price of oil.
Japan, the world's biggest export buyer, has been pushing to link prices to cheaper gas in the US, where the shale revolution has turned a shortage into a glut and has most pundits forecasting the US will become a substantial exporter.
Australian companies have said their existing contracts will remain, but Mr Ruhl said they could not be held as certain. "Normally in times of change, contracts are maintained as long as possible and then, typically, if it gets completely out of fact with the real world you'll see some renegotiations going on," he said.
"It depends on contracts and clauses in specific contracts, but . . . often times there is space for renegotiations if contracts seriously get out of sync with what happens in the rest of the world."
Most observers see the Japanese utilities as considering themselves bound by their contracts, but many are less confident about the potential behaviour of Chinese state-owned buyers.
Mr Ruhl said BP believed that in the next four or five years the odds were weighted towards declining, not rising, prices of both oil and gas.
Sentiment: Strong Sell
it is a different country for Pete's sake. The deal is done and stop wishing on bad news., suck it up like a tru ho that u r and deal with it. price will be !.75 plus and stock at $121. Go to Australia dummmass
Sentiment: Strong Buy
pobama. Too bad you never took Economics 101. The changing economics ( supply ) in the Asian market makes another project out of PNG D.O.A. InterOil has a money losing mini-refinery and some stranded gas. Given the political risk and recent cost blow-outs no one wants to sink big capex. The time was 5 years ago if ever. Where are the long term gas flow tests?
Sentiment: Strong Sell
The evidence just keeps piling up re: the lack of economic viability of InterOIl's unFIDDED "project"
Japan to build LNG Terminal for US Shale Gas Imports
Saturday, 02 March 2013
Posted by Muhammad Iqbal
TOKYO: A local government in western Japan is planning to build a liquefied natural gas terminal to import shale gas from the United States and help reduce reliance on nuclear energy, the Nikkei newspaper reported on Saturday.
The government of Fukui Prefecture will work with the national government and seek cooperation from Kansai Electric Power Co, Hokuriku Electric Power Co and Osaka Gas #$%$ the project, the Nikkei reported without citing the source of its information.
Nuclear power supplied nearly 30 percent of Japan's electricity needs before a massive earthquake and tsunami nearly two years ago sparked nuclear meltdowns at the Fukushima plant in the northeast.
Since then, almost all of Japan's nuclear plants have been idled due to worries about safety in the earthquake-prone country.
Fukui Prefecture, which is also eyeing Russian energy group Gazprom as a potential source of LNG, is planning to build a thermal power plant and a pipeline to carry the fuel to other parts of western Japan, the Nikkei said.
Tsuruga Bay, which opens into the Sea of Japan, is a leading candidate for the LNG terminal and the thermal power plant, the Nikkei said.
That stretch of Fukui's coastline has been nicknamed the "Atomic Arcade," because it hosts more nuclear reactors than any other part of the country.
Sentiment: Strong Sell