golanmann: TEXT-S&P Says Regional Gas Pricing Is Likely To Stay For Few Years

Thursday, December 6, 2012

SINGAPORE (Standard & Poor's) Dec. 5, 2012--Structural and

regulatory factors are likely to keep gas prices regionalized

for at least the next few years. The possibility that pricing

will converge through gas-on-gas competition will only

materialize over the next five to 10 years. That's according to

a report, titled "Liquefied Natural Gas Producers Will Likely

Benefit From Regional Pricing A While Longer," that Standard &

Poor's Ratings Services published recently.

"We expect liquefied natural gas producers to maintain

favorable pricing power for the next few years, given tight LNG

supplies and the forecast for demand outpacing new liquefaction

capacity until at least 2014," said Standard & Poor's credit

analyst Andrew Wong. The report says that divergence in global

gas prices has become more pronounced in the past 12 months or

so due to recent changes in global supply and demand. The

divergence reflects underlying regional market fundamentals,

such as excess gas supply in North America, rapid growth in gas

demand in Asia at a pace faster than the global average, and

constrained gas supply in Asia from maturing fields. This has

seen a widening gap between Asia-Pacific natural gas production

and consumption. Standard & Poor's believes that natural gas

consumption is likely to continue to grow, particularly in Asia.

At the same time, domestic gas supplies will remain constrained

and the use of imported gas, namely LNG, will increase. LNG

producers should be able to bridge the gap in demand and supply,

creating positive operating conditions for LNG producers in the

short term.

According to the report, LNG producers face risks in the

form of higher supply from additional capacity and the possible

development of unconventional gas resources, such as coal bed

methane, from 2015 onwards. "Falling LNG prices and potential

changes in contractual conventions projects could threaten the

economics of large LNG projects in the long term," said Mr.

Wong.

golanmann