Indonesia

As natural gas takes on an ever-expanding role in Asian energy markets, the traditional practice of sourcing liquefied natural gas (LNG) through long-term, “point-to-point” supply deals at oil-indexed prices is being challenged on several fronts. For one, U.S. exporters are linking the price of their LNG to Henry Hub gas prices. For another, Asian LNG customers, eager to reduce costs in a suddenly glutted LNG market, are working to renegotiate their oil-linked deals, and turning to the LNG spot market, where prices have been attractively low. Fast-changing market dynamics include planned gas pipelines from Siberia to China that may well make the Asian LNG market more like Europe, where LNG competes head-to-head with piped-in gas and with coal. Today, we continue our look at the changing international market and what it means for U.S. and Canadian gas producers and LNG exports.

Asian consumers of liquefied natural gas (LNG) hope to use the current supply glut—and the start-up of U.S. LNG export facilities--to their long-term advantage. Their very understandable goal is to up-end the old market structure, which for years has had them paying far more for LNG than their Western European counterparts. How will the coming revolution affect U.S. natural gas producers and the next round of U.S. LNG export projects? Today, we continue our review of the fast-changing global market for LNG with a look at a new set of Asian LNG buyers and at the region’s fast-changing supply/demand dynamics.