MONDAY, NOVEMBER 28, 2005
Rising fuel demand in Asia, Europe and the United States and a shortage of pipelines are pushing liquefied natural gas prices to records, benefiting producers like BP and hurting industrial companies from Spain to South Korea.
Victor Shum, an energy consultant at Purvin & Gertz in Singapore, said the price of spot liquid natural gas being shipped to Europe could more than double to $15 per million British thermal units.
"The market's really tight," Jean-Fran?ois Capelle, vice president for liquid natural gas marketing in Asia at Total, said last week in Seoul. "The cargoes are just not available."
Gas prices have soared 89 percent this year at Henry Hub, the U.S. benchmark gas terminal, on supply disruptions caused by hurricanes in the Gulf of Mexico. In Britain, prices have tripled in a year because of lower output from the North Sea, prompting BP to import supplies and consumers like Terra Industries to cut output.
Natural gas has risen sixfold on the New York Mercantile Exchange since September 2001 and on Oct. 5 touched a record $14.75 per million British thermal units. In Britain, a benchmark for Europe, prices rose to the equivalent of $20.15 per million BTU last week.
Competition for supplies is intensifying as record oil prices in the past two years prompted utilities to increase the use of cheaper, cleaner liquid natural gas. A drop in supply from Indonesia, the world's biggest seller of the fuel, is also forcing Asian buyers like South Korea to seek more supplies outside the region.
Japanese utilities led by Tokyo Electric Power and Tokyo Gas are planning their largest-ever price increases in January after gains in the cost of LNG and other fuels.
Other utilities are not so lucky. Prices may reduce profit at Korea Electric Power, the biggest energy company in the country, in the fourth quarter because the government will not allow it to raise power tariffs.
"Kepco takes on all the losses because it can't pass on the costs to consumers," Ji Chang Young, manager of investor relations, said.