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LNG prices

LNG prices

The price of LNG varies considerably from region to region, with a fourfold difference between the US and Japan, as can be seen in the figure below. The largest importers are Japan, South Korea, China, Spain and Taiwan. Regional LNG base prices are influenced mainly by the availability of resources for power generation and security of supply. Thus, the US price is strongly influenced by the country’s extraction of low-priced shale gas, while LNG imports to the USA are negligible. Today’s worldwide LNG base trade prices are between $10 and $15/mmBTU. The low-end prices are found in the United States, the highest in Asia, with European prices in between. Worldwide, there are three markets, with each experiencing different dynamics:

  • in the US, an abundance of natural gas as a consequence of shale gas extraction;
  • in Europe, a switch from gas to coal for power generation due to the drop of coal prices, resulting in lower LNG imports;
  • in Asia, high demand, mainly from Japan, which needs to replace almost 30% of its supply, following the shutdown of nuclear capacity.
     

                                    World LNG Estimated November 2013 Landed Prices (Waterborne Energy, Inc.)

On top of the base price, small-scale distribution costs are estimated at $2-4/mmBTU, depending of the size and throughput of the distribution terminal. The cost of LNG distribution (and hence the purchase price) can be low at an import terminal with large land-based demand, and high at small remote terminals with low utilisation.

 

The cost difference between LNG, MGO and heavy fuel oil (HFO) varies with time, depending on global supply and demand factors. At the end of 2013, the base LNG price was about 40% of the MGO price and 60% of the HFO price, compared on an energy basis.

 

                                                      Historical fuel prices of marine fuels and natural gas (€/MWh)

                                             Note: distribution costs should be added to these terminal prices.

 

 

No single global LNG price

Regional LNG prices are affected above all by the availability of other energy sources. Limited access to energy resources results in the highest price in Japan, while an abundance of low-priced shale gas keeps LNG prices low in the US Given the availability of other options, prices in the EU lie between Japanese and US prices.