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LNG may turn more expensive than crude oil, says Bernstein
Source: BI-ME and Bloomberg , Author: BI-ME staff
Posted: Sun June 22, 2008 12:00 am
INTERNATIONAL. Liquefied natural gas may become more expensive than crude oil as demand from Asia and Europe rises faster than supply, Sanford C Bernstein & Co said.

“It’s clear that LNG prices overall are set to rise towards parity with the oil price,” Bernstein analysts led by Neil McMahon said in a report yesterday. Sellers of the fuel are renegotiating contracts to increase prices, it said.

Prices may decline in 2009 and early 2010. After this, limited new supplies of LNG between 2010 and 2015 will make market conditions “very tight,” raising the potential of “an LNG premium above the oil price,” the report added.

LNG cargoes have sold for as much as US$20 amn cubic feet this year, Sanford said. Crude oil futures at today’s price of US$136 a barrel are the equivalent of about US$22 amn cubic feet, based on the energy content of the fuels.

The growth of import terminals will outpace the rise in LNG supplies to a point where global regasificaton plant capacity is more than double LNG production by the end of 2010, Bernstein said. Some planned LNG production projects in Nigeria, Australia and Iran will get pushed back into the second half of the next decade, Bernstein added.

Limited growth in alternative energy sources and long lead times for new nuclear power stations will mean demand for LNG grows at more than 10% a year, the report said.

Qatar, already the world’s biggest LNG producer, will boost LNG supplies by 45 million tons a year with six new production trains due to start before the end of 2010.

BG Group, the UK’s third-largest oil and gas company, will benefit the most from rising LNG prices. Bernstein estimates BG is diverting as much as 60% of its cargoes to Asia and 25% to Europe, raising its forecast for BG to 'outperform'.
 

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