Maestro, mas de lo mismo THE spot market will grow rapidly for liquefied natural gas shipping in coming quarters, boosted by rising Latin American gas demand, generating new and welcome flexibility for the LNG shipping industry. Spot cargoes are increasingly heading to Brazil, in particular, as the country gears up to host next year’s football world cup and stocks up on gas for power generation, gas experts told the Informa LNG Global Congress in London this week. With Argentina, Mexico and Chile also taking more spot cargoes, spot trading rose from 5% of LNG trading to almost 20% last year, generating a buzz in the industry. Argentina’s purchasing patterns are particularly promising for the LNG market because it buys more during its winter, which coincides with the northern hemisphere summer when LNG purchasing falls. Brazil’s LNG demand rises when its stocks of hydroelectric power are depleted. As for Chile, analysts highlight the country’s plans to build new import terminals, creating an opportunity for further inbound seaborne spot shipments. Experts expect the LNG spot market to continue to grow over the next three to four months, creating fresh spot cargoes for the global fleet of around 400 vessels. This development moves LNG shipping further away from its traditional rigid long-term contracts, agreed over 15 or 20 years, bringing it more in line with other shipping sectors such as crude tankers and dry bulk shipping. The dominance of long-term contracts has led some commentators to dismiss LNG shipping as nothing more than a floating pipeline. Now, however, there are signs that growth in spot trade is transforming the industry. “People are more comfortable with the spot market now,” said Glencore LNG trader Rajiv Panicker. “We will see the spot market continue to evolve.” The development has led LNG producers to sell about 90% of volumes on long-term contracts and hold back about 10% to sell themselves on spot. “Everybody’s looking for flexibility and spot cargoes give you that,” said LNG Broking global manager Luca Bertali. Market arbitrages, in which different LNG sale prices exist in different regions, boost spot trading, according to Petrobras LNG trading manager Marcio Demori. However, there are pressing questions about how long Latin American LNG demand will last. Argentina, for example, has large shale gas reserves that it has yet to tap. If it extracts its shale gas at scale after 2020, its LNG import needs will drop, mirroring the dramatic change seen in US demand. Responding to this possibility, Mr Demori said Brazil would remain an LNG importer for the foreseeable future. For the spot market to continue to grow to 30% of LNG trading, it is important to create a financial product to hedge players’ exposure to the spot market, said Mr Bertali.
Posted on: Sat, 28 Sep 2013 19:14:15 +0000
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