Relative Competitiveness of Middle Eastern term LNG supply to the Indian Subcontinent

摘要

Natural gas production in the United States has expanded rapidly since 2010 and created an environment where not only was production growing much faster than consumption, but also where the necessary pipeline infrastructure to supply the domestic US market was struggling to catch up. This laid the foundation for developers to enter the LNG export industry with their initial focus supplying fast growing demand centres in the Pacific. Very few Asian importers of LNG have sufficient pipeline alternatives to LNG, meaning that regional gas prices have frequently been significantly higher than elsewhere in the world. The growth in shale gas production drove Henry Hub below $2.00/mmBtu at a time when natural gas delivered into Asia was priced at $15.00/mmBtu or more. That potential margin promised a tremendous window of opportunity for LNG developers such as Cheniere. Following the Fukushima crisis in Japan, which swiftly removed most of the island nation's nuclear capacity due to precautionary shut-down orders, LNG prices even spiked to above $20/mmBtu. However, the LNG industry has been growing ever more dynamic, so that opportunities arise and fade increasingly quickly. One of these opportunities is going to be robust LNG demand growth on the Indian subcontinent, in our view. This poses the question to what extent US LNG may be competitive vis-a-vis nearby Middle Eastern competition.