Tuesday April 1, 2008 Indonesia to get record price for LNG JAKARTA: Indonesia, the world's third-largest exporter of liquefied natural gas, will get record price for the fuel supplied to Japan in a contract extension starting 2011 as buyers seek to secure supply amid rising demand.The price of LNG from the Bontang plant on Borneo island will be “almost'' US$16 a million British thermal units, Iin Arifin Takhyan, vice-president at PT Pertamina, the appointed seller for the fuel, said in Jakarta yesterday.Benchmark LNG prices have more than doubled since 2002, partly as a slump in Indonesia's exports forced Asian power generators to seek replacements on the spot market. The Southeast Asian nation has contracts with a group of Japanese utilities including Kansai Electric Power Co. and Osaka Gas Co to supply a total of 12 million tonnes of LNG a year, which will expire by March 2011. The Southeast Asian nation will cut LNG supply to Japan by 75% to 3 million tonnes a year for the first five years after current contracts expire, Takhyan said. The supply will be reduced to 2 million tonnes annually in the five years after that.Indonesia sold LNG to Japan at an average of US$8.46 a million British thermal units last year, according data from LNG Japan Corp. The price of the fuel rose to US$10.56 a million British thermal units in January, the month when crude futures broke the US$100 a barrel mark for the first time since trading began in 1983.Indonesia has failed to meet LNG supply commitments to Asian customers since at least 2002 as reserves in several fields feeding its existing plants in Bontang and Arun in Aceh province declined faster than expected while domestic demand rose. The Bontang plant, the bigger of the two, is short of 35 cargoes this year, said Daniel Purba, head of LNG market development at Pertamina. – Bloomberg
Recs: 4 LNG pricing firestorm in the works LNG Pricing Firestorm in the works EU gas, power prices to soar as coal in pits - UBS Thu Apr 3, 2008 2:53pm BST
LONDON, April 3 (Reuters) - The closure of European coal-fired power plants over the next few years will drive gas prices up sharply, pushing power and carbon emissions costs up and boosting profits for cleaner power generators, according to analysts from Swiss bank UBS (UBSN.VX: Quote, Profile, Research). Soaring coal prices and tightening environmental controls on power sector emissions will see European generators drop coal and burn an extra 75 billion cubic metres gas a year -- or all the gas currently used in Italy.
"The outlook on hard coal and lignite power generation is pretty grim," UBS said in an analyst note on Thursday. "The spike in coal fuel costs and, most of all, the environmental constraints on hard coal and lignite will imply a fall in volumes from coal facilities."
UBS said because European utilities will have to meet much of the extra demand by buying more liquefied natural gas on an already tight global LNG market, wholesale gas prices across Europe could rise by 50 percent to $13-17 per million British thermal units, or 70-75 pence per therm within the next 5 years.
This could drive up wholesale power prices by more than 60 percent to as much as 110 euros per megawatt hour, while carbon emissions prices could more than double to 51 euros per tonne after carbon contraints intensify in 2012.
Generators that burn a lot of coal to supply their customers with electricity will see their profit margins squeezed, with the impact partially dampened by rising power prices. But nuclear and renewable power companies that do not have to pay to pollute stand to profit.
UBS said nuclear power companies like British Energy (BGY.L: Quote, Profile, Research), France's EDF (EDF.PA: Quote, Profile, Research) and Finland's Fortum (FUM1V.HE: Quote, Profile, Research) should profit from higher power prices, while Spain's Union Fenosa (UNF.MC: Quote, Profile, Research), French Suez-GDF and Germany's E.ON (EONG.DE: Quote, Profile, Research) will also benefit from high gas prices. (Reporting by Daniel Fineren