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Analysts: LNG Imports? Not Quite so Much

Predictions earlier this year of a flood of liquefied natural gas (LNG) that would hit U.S. shores apparently could have been uttered by Chicken Little, at least if Barclays Capital analysts are right about their expectation of relatively modest imports during the second half of 2009.

"Fears of a looming global LNG supply glut flooding the U.S. market with unwanted volumes pressured prices through most of H109," the analysts said in a note last Tuesday. "Nearly six months into the year, however, the tidal wave of LNG has not materialized, and expectations for future LNG import increases are being revised down."

It wasn't so long ago that the outlook for LNG imports was quite a bit different, at least among some (see NGI, March 2).

The Barclays analysts predict that LNG imports to the United States will show "modest growth" for the rest of the year, averaging 1.6 Bcf/d for the year, with Q2 at 1.5 Bcf/d, Q3 at 1.8 Bcf/d and Q4 at 2.2 Bcf/d.

That's due to noteworthy startup delays in new liquefaction capacity and relatively bare gas storage in Europe as well as an aversion to pipeline gas there, the analysts noted.

Qatar's first LNG megatrain is ramping up after delays following commissioning in March. The first of 2009 train additions in Yemen and Indonesia have been delayed a month, the Barclays analysts said, with the second trains for each "reportedly" delayed to the first quarter of next year. The analysts said the latest round of liquefaction delays has cut their estimate of LNG supply growth this year by 300 MMcf/d. Additionally, liquefaction in Algeria and Nigeria has been operating below capacity. "The curtailed LNG volumes are having a major impact on alleviating the global supply overhang and will remain a key area to watch for the remainder of the year," the analysts said.

"LNG imports into Europe stand in stark contrast to what the economic environment would suggest, with receipts in the UK and Belgium up by a combined 0.9 Bcf/d [year/year]," the analysts said. "European LNG takes are strong as natural gas storage levels are still low and the region is reportedly rejecting pipeline gas as much as possible."

However, Asian markets have been turning back contracted volumes, collapsing Pacific Basin spot prices to below levels in Europe and the United States. Despite demand support from India and China, Asian demand has declined 1.1 Bcf/d year/year through April, the analysts noted.

Like terminals in the United State, the recently commissioned Canaport terminal near Saint John, NB (see NGI, June 22) will depend on price competitiveness to attract cargoes, the analysts noted. "Should the terminal begin receiving consistent volumes, its operations will likely translate into higher pipeline imports from Canada to the U.S.," they said.

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