Text size:

  • Small
  • Normal
  • Large

Weaker Asian demand forecast for Gulf LNG

Leading Gulf gas exporters such as Abu Dhabi and Qatar will see lower demand for the fuel from Japan this year, putting pressure on gas revenues.

Leading Gulf gas exporters such as Abu Dhabi and Qatar will see lower demand for the fuel from Japan this year, putting pressure on gas revenues. Demand for liquefied natural gas (LNG), which is chilled and compressed for shipment, has fallen sharply in line with energy consumption as a result of the economic crisis. Japan is the world's largest consumer of LNG, as it has few domestic gas reserves and no pipeline links to mainland Asia.

Tokyo Gas, the country's largest gas company, planned to reduce LNG imports by 0.5 per cent as it forecast its first decline in gas sales since 1977, the company said yesterday. "Our sales to steel producers plunged more than 50 per cent in February while those to machinery makers, including auto companies, fell by 37 per cent," Matsuhiko Hataba, an executive at the company, told Bloomberg. "The contraction in the global economy is having a massive downwards impact on energy demand in a short period of time."

The news follows Chubu Electric's announcement on Tuesday that it would reduce LNG imports by 7.8 per cent this year. Chubu is Japan's third-largest utility. All of Japan's utilities are scheduled to report on their gas-purchase plans by March 31. The country buys 4.7 million tonnes per year of LNG from Abu Dhabi through a long-term contract between Tokyo Electric and Abu Dhabi Gas Liquifaction (ADGAS).

Qatar ships 7.2 million tonnes of LNG to Japan every year. Most LNG is sold under long-term contracts that are tied to the price of oil, so producers are in a double hit. They have been getting lower prices for cargoes to Asia but have been forced by weak demand to divert ships to the US and the UK, where prices were lower still, said Nikos Tsafos, an LNG analyst at PFC Energy. "Japan and Korea: those were the sweet markets last year," he said. "Now you have to settle for lower prices overall, and you have to essentially look for places to put that LNG."

Most contracts to Asia allow buyers to cut the volume of gas they buy by up to 10 per cent without financial penalty under a mechanism called downwards flexibility. Industry sources said Tokyo Electric was likely to continue to import the full 4.7 million tonnes from Abu Dhabi, but it would be unable to take an extra 1 million tonnes per year that was usually sold to the company on the spot market.

"The good news for Abu Dhabi is that Tokyo Electric do not think they need to exercise downwards flexibility," said an industry consultant who is involved in LNG price negotiations. "This year they think they can manage with their contract volumes." ADGAS can produce up to 5.8 million tonnes per year, leaving the company with about 16 cargoes to sell on the spot market. * with Bloomberg cstanton@thenational.ae

Back to the top

More articles


Editor's Picks

 The Greens, villas: Q1 no change. 3BR - Dh210-250,000. 4BR - Dh210-260,000. 5BR - Dh220-300,000. Q1 2013-Q1 2014 5% rise. Pawan Singh / The National

In pictures: Where Dubai rents have risen and fallen, Q1 2014

Find out how rental prices in the prime locations in Dubai have altered during the first three months of the year and the current rates you will pay according to data provided by Asteco.

 Above, the private pool of Ocean Heights' five-bedroom penthouse flat. Courtesy Christie’s International Real Estate

In pictures: Penthouse flat is height of Dubai luxury living

A five-bedroom penthouse in Ocean Heights in Dubai Marina is on sale for Dh25 million and comes with a private pool and an unparalleled view of Dubai.

 The cooling towers of the Temelin nuclear power plant near the Tyn nad Vltavou in Czech Republic. The country wants to continue expanding nuclear energy capacity despite cancelling a tender to build two new units. David W Cerny / Reuters

In pictures: Best business images for the week to April 17, 2014

Here are some of the best business images for the week to April 17, 2014.

 Three generations of the Hakimi family tend to their stall Crawford Market in Mumbai. Subhash Sharma for The National

In pictures: Shopper’s delight at Crawford Market in Mumbai

Crawford Market is an old British-style covered market dealing in just about every kind of fresh food and domestic animal imaginable. Later on renamed Mahatma Jotirao Phule, the market remains popular among locals and visitors by its old name, taken from Arthur Crawford who was the first municipal commissioner of the city.

 The Wind, Energy, Technology and Environment Exhibition takes place from April 14 to April 16. Above, the Dewa showroom during last year’s Wetex. Jaime Puebla / The National

April corporate and economic calendar for the UAE and overseas

From Cityscape to Wetex to stock-market holidays to nations reporting first-quarter GDP figures, here is our helpful calendar of April's business events in the UAE and internationally.

 Get the latest information on credit cards, bank accounts and loan products in the UAE. Mark Lennihan / AP Photo

Rates report: Latest on UAE loans, accounts and credit cards

Souqamal.com brings you the latest interest rates on banking products in the UAE.

Events

To add your event to The National listings, click here

Get the most from The National