Given Japan's increased appetite for LNG in the wake of the March 11 earthquake and tsunami, the global LNG market could begin showing some signs of tightness as early as the end of 2011, Barclays Capital said Monday.
"We believe LNG production should be able to meet global needs in 2011," the bank's analysts said. "We now see risks for supply tightness into the end of 2011. The balance of liquefaction and regasification capacity additions in 2012 suggests that the market is heading for further tightening next year."
The lost nuclear generating capacity in Japan should boost LNG imports into the country by a much as 1.2 Bcf/d for the rest of the year, the report said. Further, new regasification terminals in China and Thailand, and expected demand growth from Korea and India, should boost total Asian imports to 19.8 Bcf/d this year alone, up 2 Bcf/d from the same time last year, Barclays said.
At the same time, LNG suppliers are expected to add only 1.2 Bcf/d of liquefaction capacity in 2012, while global regasification capacity is likely to rise by another 2.1 Bcf/d, the report said.
Adding supply fears is continued unrest in Nigeria, which accounted for 60% of imports into Spain, France and Portugal last year as well as political uncertainty in other global suppliers Egypt Yemen and Libya, the analysts said.
Given burgeoning demand and possible supply risks, both North America and Europe will receive fewer LNG cargoes, with the former losing out first because of lower prices.
The analysts forecast North American imports will fall by 200,000 Mcf/d next year, while Europe imports will decline by 900,000 Mcf/d.
The report said that while "a tightening global LNG market could pull some spot cargoes away from North America," the decline in imports is unlikely to have a material effect on North American prices given that LNG accounts for only 2% of the continent's supply.
Europe, however, would make up for the LNG shortfall with pipeline gas from Nord Stream, a Russia-to-Germany system due to come online at the end of the year and Medgaz, an underwater line between Algeria and Spain.
The analysts said the net result would be a 300,000 Mcf/d drop in LNG import to the UK alone, but markets would counter that by displacing gas with coal. Still, the implied shortfall led Barclays analysts to raise their UK NBP forecast to 58 pence/therm this year and 68 p/th in 2012.
The NBP's prompt-month contract settled Monday at 66.2 p/th.
