World LNG Output May Rise 14% in 2009 on New Projects

By Dinakar Sethuraman

Aug. 18 (Bloomberg) -- Liquefied natural gas output may rise 14 percent next year as ventures in countries like Qatar and Indonesia, accounting for more than a quarter of the world's supplies, begin production, said a London-based consultant.

Output of LNG, or gas chilled to liquid form for transport by tankers, may climb about 25 million metric tons to about 208 million tons next year, Andy Flower, an industry consultant and a former executive at BP Plc's LNG business, said in an interview in Singapore. The increase may suffice to meet annual demand from South Korea, the world's second-biggest LNG buyer.

Global LNG trade rose 7.3 percent to 165.3 million tons last year, according to the BP Statistical Review of World Energy June 2008. Demand for the cleaner-burning fuel will increase 10 percent a year through 2015, more than five times as fast as crude oil, Citigroup Inc. analysts led by James Neale said in an April report.

``Consumption of LNG this year may reach about 183 million tons from 173 million last year,'' Flower said in Singapore on Aug. 15. ``New projects are starting up in Qatar, Indonesia, Yemen, Australia and Russia.'' Flower's output estimates for last year are higher than BP Plc's. Projects from Australia to Nigeria may have produced about 88 million tons in the first six months of 2008, he said.

Still, output was lower than expected because of diversion of gas for domestic use in some countries and inadequate pipeline infrastructure and equipment failures in others. Egypt produced about 5.2 million tons in the first six months of 2008, compared with a potential 6.1 million tons, to meet energy demand at home, Flower said. Nigeria supplied about 8 million tons, or about 72 percent of its first-half capacity, he said.

Tight Winter Supplies

LNG supplies this winter may be ``very tight,'' Flower said, which could boost prices. Prices may rise to as much as $25 per million Btu in the Northern Hemisphere winter, said John Harris, a director at Cambridge Energy Research Associates Inc.

``Asian prices are influenced by U.K. gas future prices,'' Flower said, because Japan and South Korea compete for LNG with Europe. Prices of gas in Continental Europe are linked to oil prices and they trail behind crude oil by three to six months, he said, declining to give a forecast on LNG prices.

U.K. gas futures for winter are trading at about $17.3 per million Btu, according to data compiled by Bloomberg News. A British thermal unit is equivalent to the heat generated by a lighted match.

LNG is natural gas that has been reduced to one-six- hundredth of its original volume at minus 161 degrees Celsius (minus 259 Fahrenheit) for transportation by ship to destinations not connected by pipeline. On arrival, it is turned back into gas for distribution to power plants, factories and households.

To contact the reporter on this story: Dinakar Sethuraman in Singapore at dinakar@bloomberg.net