Australia will become the main supplier of liquefied natural gas to Asia as import capacity in developing nations doubles coupled with a decline in new South- East Asian and Qatari projects, Sanford C. Bernstein & Co. said.
“Although some believe that competition between projects could drive prices lower, the high marginal cost of Australian LNG projects will require contract prices to be close to oil parity in order for projects to be developed economically,” analysts Neil Beveridge and Angus Chan said in a report today.
Mark Greenwood, a Sydney-based analyst at Citigroup Inc., wrote in an Oct. 4 report he sees signs of falling LNG prices as competition increases among Australian projects. He also said delays are possible “because of a lack of customers.” Woodside Petroleum Ltd., Australia’s second-largest oil and gas producer, said today it doesn’t expect its proposed LNG developments to be delayed because of a lack of Asian demand for the fuel.
The supply-demand balance will tighten over the coming three years ending the current oversupply of LNG, Bernstein said. Re-gasification capacity will more than double in the next five years in emerging Asia, which includes China and India.
Regulated gas prices in China and India will continue to rise because of the higher cost of imported LNG, Bernstein said. Indian gas prices have doubled and China’s by 25 percent this year, the research company said.
Australia, which accounts for less than 10 percent of current LNG production, makes up for one third of incremental new LNG capacity under construction and 50 percent of possible new projects, Bernstein said.
Strong demand growth in China and India, limitations in infrastructure capacity and misguided regulatory pricing policies mean that supply remains unable to keep pace with demand, Bernstein said, picking Oil Search Ltd., Woodside and PetroChina Co. to benefit from the strong gas volume growth and gain from higher Asian gas prices.
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