China ready to buy LNG even at Higher Prices

Dec. 2, 2006 – Petroliam Nasional Bhd, Malaysia’s national oil company signed a deal in October this year (2006) to supply LNG to Shanghai for the next twenty-five years (starting from 2009). The company plans to, initially, deliver 1 Million Metric Ton a year, rising to 3 Million Ton year on year after 2012.

China’s emergence as a rising importer of LNG is expected to encourage increased investment in this sector, say industry experts. China has demonstrated its desire to pay increased prices, owing to soaring oil prices in world market, and ensure that there’s enough gas supplies in the country. Most industry observers believe that despite China’s willingness to buy LNG at higher prices, increased prices of LNG will keep the market tight in Asia.

Long-term LNG contracts are priced in a sliding scale indexed to oil price. At US$ 60 a barrel for oil, Shanghai contract with Petronas will imply paying nearly US$ 6 for 1 Million British thermal units, measure for natural gas. To be precise, around double of what China had paid 3 years ago.

As per a Research Analyst’s view at RNCOS, who has recently researched a report on “Future Outlook for Global LNG Market (2010)”, the long-term contract of China for LNG has begun in 2006. The country is already having a long-term contract with Indonesia and Australia. Now, it has entered a deal with Malaysia. In near future, China is aiming towards African countries to attain further growth.

Report Highlights include:

– Atlantic LNG market is growing at faster pace as compared to Asia-pacific market.
– Role of Middle East is rising rapidly, as LNG importer.
– Japan & Korea were the largest importers of LNG in 2005.
– Current trends in market performance.
– Growth sectors and factors driving change.

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