Register with us today

and in less than 60 seconds continue your access to:Latest news headlinesAnalytical topics and featuresCommodities videos, podcast & blogsSample market prices & dataSpecial reportsSubscriber notes & daily commodity email alerts

Already have an account?

Log in to register

Forgot Password

Please Note: Platts Market Center subscribers can only reset passwords via the Platts Market Center

Enter your Email ID below and we will send you an email with your password.

  • Email Address* Please enter email address.

If you are a premium subscriber, we are unable to send you your password for security reasons. Please contact the Client Services team.

If you are a Platts Market Center subscriber, to reset your password go to the Platts Market Center to reset your password.

In this list
Natural Gas

Asian gas prices will drop fast in response to US LNG exports: analyst

LNG | Natural Gas | Natural Gas (North American)

Uncertainty remains for US LNG project developers following initial China trade deal

LNG | Natural Gas | NGL

Platts LNG Alert

Capital Markets | Electricity | Energy | LNG | Natural Gas | Shipping | Leveraged Finance & High Yield | Materials | Building & Construction | Financial Services | Banking | Infrastructure | Structured Finance

Infrastructure Summit

Electric Power | Natural Gas | Oil

Iraq approves delayed gas contracts, aiming to avoid sanctions

Asian gas prices will drop fast in response to US LNG exports: analyst


The response of Asian and global markets to US liquefied natural gas exports will be much stronger and will happen much sooner than many anticipate, putting strong downward pressure on Asian prices, Rice University fellow Kenneth Medlock said Tuesday.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

Speaking on a BNP Paribas Commodity Markets conference call on the role of shale gas in the US energy transformation, Medlock said the margin for LNG export profitability is "razor thin" and that prices abroad, particularly in Asia, the primary market for exports, will "soften dramatically.

The global market will likely be able to absorb only 3 Bcf/d-4 Bcf/d of LNG from the US, a maximum 12 Bcf/d by 2020 and way below 20 Bcf/d of exports predicted in some studies, he said.

"When trade between two markets is introduced, price in each adjusts," Medlock said.

The adjustments will depend on the relative elasticities of supply and demand, or how strongly they will affect each other, which became much more pronounced due to shale gas development, he said.

The US Department of Energy has more than 20 applications pending for projects to export some 30 Bcf/d to countries with which the US has free trade agreements and another 28.54 Bcf/d for exports to non-FTA countries.

The impact of LNG exports on US domestic prices would not be as strong as many predict due to shale gas development, which makes both supply and demand much more responsive to any price changes, Medlock said.

For example, 2011-2020 US gas prices could have been as high as $6.03/MMBtu without shale development, yet shale made it drop to an average of $4.18/MMBtu, he said. For 2031-2040, the price could have been at $8.24/MMBtu, but due to shale it is only forecast to average $5.46/MMBtu, he added.

"Expansion of shale gas in the US, and later in Europe and Asia, makes the global gas supply curve more elastic," Medlock said. "This mitigates the potential for sustained long-term increases in price."

Therefore, margins for US exports are thin and will depend on how rapidly projects come online. Previously, LNG exports dealt with lots of capacity constraint and insufficient supply. That is why LNG trade was down in 2012. Yet, as capacity constraint disappears, the global gas prices will likely drop fast, he said.

--Anastasia Gnezditskaia,  
--Edited by Richard Rubin,