LNG requires price stability to grow – Tokyo Gas

10 June 2008 07:37  [Source: ICIS news]

KUALA LUMPUR (ICIS news)--To ensure sustainable growth of the liquefied natural gas (LNG) market in the future, sellers and buyers must maintain a healthy LNG value chain through long-term contracts, which would help reduce price volatility, said a senior Tokyo Gas executive on Tuesday.

"Long-term contracts are rooted in bilateral commitment and the benefits of such long-term relationships are shared between buyers and sellers," said Yutaka Kunigo, Tokyo Gas executive officer and general manager  at the 13th Asia Oil and Gas Conference.

"This would in turn discourage speculative and investment money from LNG price discussion leading to decreased volatility," he added.

LNG was increasingly becoming an alternative source of feedstock for petrochemical companies, which were reeling from record high crude prices.

Recent cost escalations, reduced liquefaction capacity and strong demand growth had pushed LNG prices to record levels. This had decreased its competitiveness and also discouraged investments into gas facilities.

"For LNG to maintain it competitiveness against other energy sources, rapid changes in LNG prices need to be avoided for continued consumer preference," he said adding that long-term stable supply and its relatively moderate price movements were LNG’s strong points.

However, with the rapid rise in LNG prices, prospective gas customers were holding off investments to new facilities, he said adding any further rise in values could make LNG lose its competitive edge.

Kunigo said that demand for LNG was expected to rise considerably in the northeast Asian markets with the emergence of China as a new importer combined with the traditional LNG importing countries like Japan, South Korea and Taiwan.

The AOGC is an industry-wide forum and runs from 8-10 June.

By: Bohan Loh
+65 6780 4359

< previous article(ICIS Podcast: Chemical News Central 2 November 2009)

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly