Expect spot LNG prices to continue rising

Vol 14, PW 23 (19 May 11) Midstream & Downstream

GAIL reduced its ex-Dahej spot R-LNG price from $13.80/mmbtu to $13.65/mmbtu on May 1, but the bad news is this reduction will be short lived.

Experts predict global spot LNG prices will spike over the next few months as power plants work to full capacity in India, China and Japan to cope with the searing summer heat. This is the third price revision in as many months.

GAIL first increased its spot R-LNG price on March 28 from $10.70/mmbtu to $12.53/mmbtu. This was followed by a further hike of $1.27/mmbtu to $13.80/mmbtu in April.

The new price of $13.65/mmbtu includes 5% customs duty and $0.77/mmbtu re-gassification charges, but excludes GAIL’s $0.20/mmbtu (Rs9.26/mmbtu) marketing margin and $0.93/mmbtu (Rs42/mmbtu) transportation charges, levied in Gujarat. For R-LNG delivered to other states, transportation charges are different.

Other taxes are service tax at 10.3% and VAT at 15%. GAIL’s price reduction received a muted response.

“In two months, GAIL raised its price by almost $3/mmbtu,” says a ceramics manufacturer in north Gujarat. “This is back breaking.

” High demand from Japan following the March 11 earthquake and Tsunami continues to push Asian LNG prices northwards, an analyst tells PETROWATCH. In the first two weeks of May, he says, LNG cargoes for June and July delivery have risen by $0.50 from $12.30/mmbtu to $12.80/mmbtu.

This month (May) the Platts indicative JKM (Japan Korea Marker) LNG benchmark averaged $11.804/mmbtu. “Nobody can say when Japan’s nuclear plants will start working again,” he adds.

“It could be by end-2013 or early 2014. For the next two years Japan will aggressively purchase LNG wherever it can.

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