UK needs higher prices to attract LNG

Friday, April 13, 2012

UK NBP prices will need to rise to draw LNG deliveries away from Asia if gas storage facilities are to be filled ahead of Winter, investment bank Goldman Sachs said Thursday.

But, LNG imports to the UK have dried up by 50% year-on-year as high demand and prices from Asia have absorbed shipments.

Data from Bentek Energy showed 2012 year-to-date UK LNG flows into the grid at 3.795 billion cubic meters compared to 7.565 Bcm for the same period in 2011.

Market analysts, however, questioned how crucial increased LNG deliveries are to taking stock levels to 100%.

Bentek analyst Oliver Sanderson said: "We have more gas in storage than ever before and more flexibility in dealing with Norway and the Netherlands."

He said higher year-on-year imports from the Netherlands and Norway coupled with low demand should result in storage facilities being adequately restocked.

Receipts of gas from the three interconnect countries--Norway, Netherlands and Belgium--are up 2.375 Bcm year-on-year, or 21%, compared to a drop in LNG sendout of 3.370 Bcm.

"This is about 1,000 million cu m less coming into the UK from external sources, but this is a low demand year. Something would have to go drastically wrong for storage not to be full by late summer," he said.

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