Daily Oil Bulletin
LNG Export Race Is On In Canada

Monday, April 23, 2012

Early movers will likely have an advantage as proponents in North America attempt to take advantage of a pricing arbitrage and send their natural gas to energy-hungry Asian markets, a complete reversal in the trend from just over five years ago.

Javier Diaz, an energy analyst, international gas, with BENTEK Energy LLC, added that at the moment, the Kitimat LNG and Douglas Channel projects are the Canadian facilities most likely to become a reality.

Traditional Asian LNG buyers have limited options for energy resources and have been averse to risk, BENTEK's Diaz agreed.

"After Fukushima, Japan's risk-aversion [has] increased with the possibility of domestic nuclear power generation going away or at least being significantly constrained, so securing LNG supplies through long-term contract has become critical for them," he said. "The current global scenario of high oil prices and low gas prices in the U.S. ... could motivate traditional Asian buyers like Japan and South Korea to purchase North American LNG, looking for price and supply diversification. However, the possibility of a significant weakening of the oil-gas prices link in the short-term looks unlikely."

BENTEK's forecast for Asian demand shows an increase of 45 per cent (9.1 bcf per day) by 2016.

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