Promise of 'Captain America' fading for Asia's LNG buyers

Sun Nov 2, 2014 4:00pm EST
 
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* Slow rate of N.America development mutes impact on Asian markets

* Only a few projects out of dozens likely to be built -analysts

* Emerging markets such as East Africa to give buyers more options

By Julie Gordon

SINGAPORE, Nov 3 (Reuters) - North American liquefied natural gas projects, once believed to be the panacea that would save Asia from paying top dollar for the super chilled fuel, are proving to be less of a gamechanger than originally expected.

High costs, gruelling regulatory processes and mounting social opposition have slowed the development of new capacity in Canada and the United States, tempering early hopes that a flood of cheap western gas would drive down prices.

A sudden rise in demand for LNG after the Fukushima nuclear disaster in March 2011 created a tight market for the commodity, pushing Asian prices to new highs and sending buyers scrambling to make deals with fledgling producers in North America.

Three years later, the majority of projected U.S. and Canadian volumes are still as much as a decade from first shipment, making it difficult for them to spare Asia from LNG prices that have been up to twice as expensive as natural gas in European markets this year.

"A few years ago, there was a kind of enthusiasm that U.S. LNG would solve everything, that is the 'Captain America' story," Ken Koyama, chief economist at Japan's Institute of Energy Economics, told Reuters on the sidelines of the Singapore International Energy Week conference.   Continued...