Customs data for 2012 show strong growth in LNG volumes into North Asia. Japan's increased appetite for LNG drove most of the 8.4%YoY gain, although China also saw growth of +20% last year.
While strong demand growth helped pull LNG cargoes from Qatar and further afield into North Asia, falling supply growth in Indonesia also supported more cargoes flowing into the region. Indonesian exports are expected to be weaker again in 2013, as more gas is consumed domestically and ageing fields reduce production.
The future of LNG pricing is becoming much more contentious given the divergences between US nat gas prices and soaring LNG prices benchmarked to oil. While today this is supported by strong Japanese demand that have become more reliant on LNG with no nuclear units in operation, the future of demand is more about China and their willingness to pay.
The average price of LNG heading into China is lower than in Japan, largely thanks to long-dated supply contracts with Australia, Malaysia and Indonesia. Marginal gas in 2012, however, has been just as expensive as everywhere else, with most incremental tonnage coming from Qatar at high prices.
So at the moment, China is paying just as much as everyone else for the marginal tonne. But as they become a larger share of the LNG market, pricing dynamics of LNG vs. alternative pipeline and domestic gas will become more important for global markets.
