LNG trade routes in flux as new supply brings price convergence
By Oleg Vukmanovic and Sarah McFarlane
MILAN/LONDON, March 21 (Reuters) - Australia's ascent to liquefied natural gas (LNG) producing giant is choking off trade routes from Atlantic to Pacific markets established after Japan's Fukushima nuclear disaster, giving rise to new routes.
Mass cargo diversions from west to east earned traders fat margins as Asian markets commanded steep price premiums, partly driven by Japan's scramble to replace lost nuclear output.
Waning Asian demand, major new supply from nearby Australia and converging global LNG prices are all putting a stop to long-haul diversions.
At $0.40 per million British thermal units (mmBtu), Asia's premium over European markets is less than the cost of shipping a cargo from Britain to Japan, a trader said, slamming the brakes on cross-basin trade.
But new routes are emerging.
"The first 25 years of Australian production went to Japan, Korea and China with the occasional cargo to Taiwan and now it's going virtually everywhere in Asia and the Middle East," said independent energy consultant Andy Flower.
"Last year it went into Singapore, Malaysia, Thailand, India, Pakistan, Jordan, Egypt, Dubai and Kuwait," he said.
The varying qualities of LNG, including the more recent super lean gas exports from Australia, are also complicating trade flows. Continuación...