Those whose interests are favored by liquefied natural gas (LNG) forsaking U.S. shores can thank more attractive oil-indexed pricing in Asia and European demand for holding back the long-predicted tide of cargoes, at least for this year and next, according to an analysis by Tudor, Pickering, Holt & Co. Securities Inc. (TPH).

“Oil-indexed pricing in Asia is keeping excess LNG cargoes in the Pacific Basin,” analysts Jon Mellberg and Dave Pursell said in a note to clients Friday. “The U.S. is currently the least attractive major LNG market, behind the Pacific Basin and Europe. Watch the U.S.-Europe price [arbitrage] as an indicator that Asia has taken all the excess LNG they can absorb (at lower than oil-indexed contract prices).”

Further, “shale [gas production in the United States] has changed the LNG business,” the analysts said. “…[S]hale production has made a mockery of previous estimates of U.S. LNG import forecasts. However, the infrastructure built to support those forecasts has fostered two productive changes in market dynamics. We believe that active markets in LNG marketing and trading, as well as the continuing trend toward portfolio optimization across the LNG chain would have developed far more slowly absent the U.S. shale phenomenon.”

Last year Russia’s Gazprom established a marketing presence in the United States. More recently, J.P. Morgan and Cheniere Energy Inc. struck a deal that gives the investment banking arm of JPMorgan Chase & Co. access to capacity at Cheniere’s Sabine Pass onshore LNG terminal in Louisiana as well as right of first refusal on deals for LNG cargoes presented to it by Cheniere (see Daily GPI, April 5).

TPH cut its 2010 LNG import estimate to 1.8 Bcf/d from 2.5 Bcf/d as high oil prices will support buying by Asians and Europeans at prices more attractive than those indexed to Henry Hub. While some have predicted imports as high as 5 Bcf/d or more, the TPH team views these estimates “as highly unlikely.”

Although they recently cut their own LNG import estimate, analysts at Barclays Capital still said last month they expect U.S. imports to average 3 Bcf/d, which would be a 1.8 Bcf/d increase from levels seen last year (see Daily GPI, March 25a).

Last month Raymond James & Associates Inc. analysts said U.S. LNG imports this year could be “up dramatically” if natural gas prices are $5 or more (see Daily GPI, March 18). Cargo traffic has recently been up significantly at Excelerate Energy LP’s Northeast Gateway (NEG) Deepwater Port off the coast of Massachusetts (see Daily GPI, March 25b).

According to TPH, sendout from U.S. LNG regasification terminals has been about 1.4 Bcf/d of late; a year ago it was about 1.1 Bcf/d.

On the liquefaction side, project economics still work, according to TPH, if facilities are backed by long-term contracts indexed to oil prices. Projects backed by contracts indexed to gas prices likely won’t go, the analysts said.

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