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    Northeast Asia becomes main market for US LNG

    Hellenic Shipping News

    Northeast Asia has emerged as the primary destination for LNG exports from the US Gulf coast Sabine Pass terminal, an indication of how quickly flexible US supplies can respond to global price signals.

    One of the main advantages of US LNG is that it does not have destination restrictions like LNG from other producing regions. Customers of US LNG can more easily send the supplies to whatever market in the world provides the best netback.

    At least 11, and possibly 12, of the 21 Sabine Pass exports since mid-November likely will go to northeast Asia, according to an Argus analysis of shipping data. Each cargo is equivalent to about 3-3.5 Bcf (85mn-99mn m³) of gas, depending on the size of the vessel.

    The trend has become more pronounced as the northern hemisphere winter has progressed, with nine or 10 of the 15 cargoes loaded since December likely headed to northeast Asia. It is not clear yet if a cargo that left Sabine Pass yesterday aboard the Clean Ocean tanker will go to northeast Asia or Mexico’s western coast.

    Since 16 November Argus has assessed the delivered spot LNG price to northeast Asia (Anea) at an average of $8.51/mmBtu for the prompt half-month delivery window. That is 43pc more than the average of $5.96/mmBtu in 1 June-15 November.

    Since 1 December the Anea prompt price has averaged $9.09/mmBtu, 25pc higher than the average of $7.25/mmBtu during the same time last year.

    Only one of the 38 Sabine Pass exports before mid-November went to northeast Asia. Of those 38 cargoes, 23 were delivered to Latin America, six to the Middle East, five to India and three to Europe. Latin American and the Middle Eastern LNG demand peak in May-October because of the Southern Hemisphere summer and air conditioning demand in the Middle East. Sabine Pass came on line in February.

    Of the 21 exports since mid-November, four likely will be delivered to Europe, four or five to Latin America and one to the Middle East.

    All the deliveries from the Louisiana terminal to northeast Asia have traversed, or are scheduled to traverse, the expanded Panama Canal. The expansion, which came on line in June, allowed standard-sized LNG vessels to pass through the canal for the first time and reduced the shipping cost from the US to Asia.

    Sabine Pass customer Shell and terminal owner Cheniere Energy are also using the Panama Canal to send cargoes to Manzanillo, west-central Mexico. The Clean Ocean tanker is listing the Panama Canal as its next destination. The vessel has previously delivered to Manzanillo so it is not clear if it is going to northeast Asia or Manzanillo.

    Argus yesterday assessed the spot LNG freight rate from the US Gulf coast to Tokyo at $2.14/mmBtu by going around South America, and $1.65/mmBtu by going through the Panama Canal. But shipping costs for Shell and Cheniere, as well as Sabine Pass customer Gas Natural Fenosa, could be cheaper because they own vessels or have long-term charters.

    Argus in December assessed the US Gulf coast free-on-board LNG price for January loading at an average of $7.30/mmBtu, so the delivered cost to northeast Asia would be about $8.95/mmBtu. The Anea was assessed yesterday at $9.795/mmBtu for delivery in the first half of February.

    Shell and Gas Natural would spend less than that to send cargoes to Asia because of their long-term contract prices. Shell pays a $2.25/mmBtu liquefaction fee plus 115pc of the Nymex Henry Hub final settlement price for a month in which a cargo is scheduled for its Sabine Pass supplies, while Gas Natural pays a liquefaction fee of $2.49/mmBtu plus 115pc of the Nymex price. Based on the spot freight rate, Shell would spend about $8.42/mmBtu to deliver a January Sabine Pass cargo to Japan and Gas Natural $8.66/mmBtu.

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