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LNG Supply Growth Seen Through October

Sendout from U.S. liquefied natural gas (LNG) terminals has increased only slightly during the third quarter over the year-ago period, but Stephen Smith of Stephen Smith Energy Associates is predicting "some increase" in sendout from late summer through October.

"It had been widely expected that new liquefaction capacity, lower oil prices and the global economic recession would likely lead to a surplus of LNG in global markets as 2009 progressed," Smith wrote in a research note in mid-August. "In the spring this appeared to be happening. But as summer has progressed LNG imports have been only moderately higher than year-ago levels."

Indeed, according to a recent update on LNG sendout from Tudor, Pickering, Holt & Co. Securities Inc. (TPH), average sendout so far in August has been 0.9 Bcf/d compared with 0.8 Bcf/d a year ago. During the first half of the year sendout was on the rise: 1 Bcf/d in the first quarter compared with 0.8 Bcf/d in the year-ago quarter and 1.3 Bcf/d in the second quarter compared with 0.9 Bcf/d in the year-ago quarter. These levels are far from the 2.1 Bcf/d realized in 2007, however.

The outage of a massive Japanese nuclear power plant, which began in June 2009, had been driving up Japan's LNG demand until the recent collapse in oil prices, Smith noted. Still suppressing the growth in global LNG supplies that had been predicted by many is Europe's thirst for LNG to replenish gas storage, he said.

European gas storage is way down, particularly in France, and Europeans are looking to wean themselves from pipeline gas from Russia given Ukraine's problems with Russian supplies, Zach Allen, president of Pan EurAsian Enterprises Inc., said last month.

But, "as European storage approaches capacity we expect some increase [in U.S. LNG imports] in late summer through October," Smith said.

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