What Price Asian LNG?
The Asian liquefied natural gas (LNG) market faces unprecedented uncertainty over the future of pricing. A 25-year consensus over how LNG is priced has disintegrated as the Asia Pacific Basin first transformed to a buyers' market and, over the past 12 months, switched to a sellers' market. A new equilibrium is yet to emerge.
* New long-term contract prices are heading up quickly. Sellers are capturing more upside both by increasing the level of oil indexation and by eliminating the price moderating impact of s-curves.
* CERA's analysis indicates that sellers will continue to have the upper hand in Asia over the rest of the decade and beyond, supported by a tight supply-demand balance and buyers' increasing eagerness to secure supplies.
* The report concludes by asking what factors could change this outcome. It identifies "nine pointers to a different world" that could tilt the market back in favor of buyers, contrary to expectations.
