LNG buyers look to U.S. to hedge future risk of Hormuz disruption

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Photo by CN-STR/AFP via Getty ImagesLiquefied natural gas buyers are accelerating discussions to buy more fuel from the United States as the Iran war and turmoil over the Strait of Hormuz forces them to seek alternatives to suppliers in the Middle East.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountCompanies in Thailand, Pakistan and Bangladesh are in talks to sign long-term contracts with U.S. suppliers, officials said at the Gastech conference in Bangkok. China Gas Holdings Ltd. signed a rare sales agreement this week from U.S. exporter Venture Global Inc. scheduled to start in 2030, despite tensions between Washington and Beijing.The move comes as disruption to Hormuz — through which about a fifth of all LNG flowed before the war — enter a seventh month and Qatar’s massive export terminal remains largely offline after being damaged by missile strikes. The loss of supply from Qatar and the United Arab Emirates to key Asian customers, coupled by high spot prices, is lifting utility bills and triggering energy shortages across parts of Asia.Breaking business news, incisive views, must-reads and market signals. Weekdays by 9 a.m.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Posthaste will soon be in your inbox.We encountered an issue signing you up. Please try again“Buyers around the world really are more focused on diversifying their LNG procurement,” Yukio Kani, the chairman of Jera Co., one of the world’s biggest LNG buyers, said on Bloomberg TV. “Some rely too much on Qatar, like more than 50 per cent or 60 per cent.”Jera — Japan’s top gas importer — has spent the last decade diversifying its sources of supply and now depends on the Middle East for about five per cent of its LNG, Kani said at the Gastech conference in Bangkok. It imports most of that through long-term contracts — a strategy that other nations should follow to reduce exposure to the volatile spot market, according to Kani.Inpex Corp., the Japanese energy producer, is considering investing in an LNG export project in the U.S., chief executive Takayuki Ueda said in an interview. The flow of LNG through the strait, he said, “will not return to the previous status quo.”“Diversification of our portfolio — in our words, portfolio resiliency — is important,” Ueda said.To be sure, companies are looking beyond the U.S. as well. Inpex is exploring projects in South America, Ueda said. Thai company officials at Gastech, meanwhile, showed interest in LNG from Canada and the Asia Pacific.U.S. suppliers tend to offer among the lowest prices for longterm contracts, in part because the agreements are linked to the nation’s Henry Hub benchmark and vast shale reserves have kept domestic prices low. Shipments from the U.S. under long-term contracts are being delivered to Asia at US$8 per million British thermal units, according to officials at U.S. and Japanese companies.For comparison, LNG prices in the spot market for Asia are about US$30 per million Btu as European and Asian buyers compete for a limited pool of supply.However, the prices of some U.S. contracts have increased, due in part to supply chain bottlenecks and a reaction to the current tightness in the market, according to company officials and traders. That, plus a general shift to reduce exposure to LNG, may act as a hurdle to any fast deals.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.U.S. supplies also have the flexibility to be delivered to both to Asia and Europe. This also means that a buyer can import U.S. LNG shipments into their domestic market if there are requirements, or resell it if there is demand or more profitable places overseas.New LNG supply from North America has replaced more than half of the Middle Eastern volumes lost from the global market this year, Cederic Cremers, Shell PLC’s president of integrated gas, said Monday.The U.S. is the world’s largest LNG exporter and is poised to roughly double exports by the end of the decade. ExxonMobil Holdings Corp. expects U.S. LNG to account for about 30 per cent of global supply by 2030, senior vice president for LNG Peter Clarke said Monday. Projects including Woodside Energy PLC’s Louisiana LNG and Cheniere Energy Inc. expansions are currently marketing LNG supplies for delivery starting by around 2030.“America wants to sell you gas,” James Danly, U.S. Department of Energy deputy secretary, said during a panel at Gastech. “I’ve been yelling it from the rooftops.”—With assistance from Patpicha Tanakasempipat and Ruth Liao.We apologize, but this video has failed to load.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.