By Dinakar Sethuraman
April 28 -- The U.S. may supply liquefied natural gas to China as cheaper output costs outweigh transportation charges, making the U.S.-produced fuel competitive, Standard Chartered Plc said. China, the world’s second-biggest energy user, may have paid about $10 per million British thermal units in recent LNG contracts compared with about $6.35 for the three year-average at Henry Hub, the U.S. gas price benchmark, the bank said in a report today. China has agreements to buy LNG from Qatar and Australia.
“The likelihood of U.S.-produced gas being shipped to Asia on a profitable basis is increasing,” said Singapore-based analyst, Han Pin Hsi. “This is provided Henry Hub prices hover at the three-year average of $6.35 per million Btu with shipping and other re-gas or liquefaction costs staying below $3.65.”
China has signed contracts for about 34 million metric tons of LNG a year, compared with projected annual demand of 40 million tons by 2020, Sanford C. Bernstein & Co. said. U.S. gas output climbed the past four years, contributing to a glut, as drilling advances unlocked fuel-rich shale formations from Louisiana to Pennsylvania.
“Our estimates have taken into consideration days of voyage and an anticipated LNG carrier price of $55,000 a day,” Standard Chartered said. “The buffer is greater if we factor in current Henry Hub pricing.”
It takes about 64 days for a ship to sale to Asia from the U.S. Gulf.
China’s Prices
U.S. natural gas futures rose 0.6 percent to settle at $4.24 per million British thermal units on the New York Mercantile Exchange yesterday.
Gas prices in China may rise in the near term because of higher demand and government plans to increase prices by as much as 20 percent, Standard Chartered said.
By 2008, unconventional gas supplies accounted for more than half of domestic production in the U.S. compared with 15 percent in 1990, with the volume quadrupling to 300 billion cubic meters a year, the bank said.
For prices based on crude oil at $80 a barrel, the bank estimated typical LNG pricing at as much as $13.80 per million Btu, while for term contracts where crude is part of the pricing, the fuel may cost as much as $12.60, it said.
Source: http://www.bloomberg.com/apps/news?sid=ahx7_VmKt2tA&pid=20601087
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