LNG interest from Asia’s emerging gas markets rises as prices ease

Buyers in Thailand, India and Bangladesh have been on the sidelines for months as prices soared following Russia’s invasion of Ukraine, while European buyers paid top dollar for supplies to make up for the shortfall in Russian supplies.

Should prices stay low, it may mean additional LNG demand that was not there last year.

Asian spot LNG prices last week were $19.50 per million British thermal units (mmBtu), the first time they have fallen below $20 since September 2021, as inventories remain high with peak winter demand due to end soon. Prices are down more than 70% from August’s record of $70.50/mmBtu and have dropped by a third so far this year.

Amid the falling prices, Bangladesh’s state-owned Rupantarita Prakritik Gas Company Ltd (RPGCL) last week issued a buy tender for one LNG cargo for delivery in late February.

Officials at the country’s national gas company Petrobangla said on Wednesday that it is planning to buy 10 to 12 cargoes of LNG from the spot market until June, reversing a government decision last year to halt spot purchases in July after prices spiked.

Thailand’s PTT has also issued tenders seeking a total of 12 LNG cargoes to be delivered between February and April, while India’s GAIL Ltd and Petronet respectively sought cargoes for February delivery.

“We are back in the comfort zone of many price sensitive South and Southeast Asian buyers. Accordingly we have seen Thailand and Bangladesh most recently,” said Kaushal Ramesh, senior LNG analyst at Rystad Energy.

Ramesh also noted that spot LNG prices are now competitive with the price of coal for power generation. He sees the recent buying interest, along with cold temperatures from a polar vortex in North Asia, lending near-term support for LNG.

Still, prices remain higher than before the Ukraine conflict began, meaning emerging market buyers will be sensitive to any movements higher, which could happen as China, the world’s second biggest LNG importer, may also return to the market after reopening from strict anti-COVID controls.

“An Asian spot price of less than $15/mmBtu would likely be more ideal for these buyers to confidently return to the spot market,” said Ryhana Rasidi, an analyst at data and analytics firm Kpler.

“However, given the possibility of rising Chinese LNG demand as the economy reopens, this could keep spot prices elevated and away from the ideal price for emerging market buyers.”