Asian Utilities May Have Halved Spot LNG Purchases for Winter

By Dinakar Sethuraman

Nov. 25 (Bloomberg) -- Asia may have halved imports of liquefied natural gas spot cargoes for winter consumption after inventories climbed because of mild weather and as the global financial crisis cuts demand, ship-tracking data shows.

Utilities including Tokyo Electric Power Corp. and Korea Gas Corp. may have bought at least eight LNG cargoes from the Atlantic Ocean area for delivery this month compared with about 16 in November last year, according to transmissions from ships captured by AISLive on Bloomberg and official data.

“The summer was not as hot as expected and the tanks are running full in Japan and Korea,” James Palairet, an analyst with LNG Shipping Solutions, said by telephone from London. “There have been more spot cargoes going to Europe and the U.S. in the past few weeks.”

A cooler Northern Hemisphere summer and a slowdown in the global economy have reduced demand for electricity to run air- conditioners in Japan and South Korea, the world’s biggest LNG importers. Spot LNG prices have halved from about $21 per million British thermal units, including shipping costs, reached in September, based on government data. In September, utilities in Asia imported 19 cargoes, based on official data.

Japan’s imports of spot and multi-year cargoes decreased 8.6 percent to 5.5 million metric tons last month, according to a preliminary report released by the finance ministry in Tokyo on Nov. 20. The country paid an average $14.6 per million Btu for the fuel in October compared with more than $20 for a spot cargo from Egypt in September.

Korea Gas

Korea Gas Corp., the world’s biggest buyer of LNG, said on Nov. 10 domestic sales of natural gas fell 3.7 percent in October from a year earlier as demand from power plants dropped 10.7 percent.

Taiwan Power Co., which consumes more than half of the island’s LNG imports, expects electricity demand to increase at the slowest pace in seven years in 2008 because of the global recession and higher prices, Chief Engineer Tu Yueh-yuan said in an interview in Taipei on Nov. 19.

“Barring some presently unforeseen event, the spot and diversion market for this winter in Asia is dead,” Pan EurAsian Enterprises, a U.S. energy consultant, said in a Nov. 20 report. “Reduced economic growth and manufacturing plant shutdowns figure all through Asia with a strong impact on LNG imports.”

Methania, a LNG tanker, was forced to return to the Zeebrugge LNG terminal in Belgium after a month because it failed to find a buyer in Asia willing to pay a premium for a spot cargo, according to Pan EurAsian and Distrigas NV.

Gas Premium

Asian utilities must pay a premium of at least $3 to $4 per million Btu to prices of gas in U.K. to draw cargoes away from Europe, Palairet said.

Spain’s import growth slowed to 8 percent in November after storage tanks reached 79 percent of capacity, the report said. Still, purchases increased 22 percent in the first 10 months from a year earlier, the highest among large LNG importing nations.

The decline in November supplies was led by China and India, which did not buy any cargoes from the Atlantic Ocean area compared with at least three in September, ship-tracking data and Chinese customs figures show. Japan and South Korea bought at least seven cargoes from the Atlantic Ocean area this month compared with about 13 in September. Official data on October imports will be announced later this month.

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