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Sunday, January 20, 2013

Liquefied Gas Should Start Flowing This Week

Source: Haaretz
By Itai Trilnick and Reuters


The ship importing liquefied natural gas to Israel was set to start its first tests of the new LNG hookup on Saturday. The Excelerate Energy ship has been waiting offshore for a month with a full load of LNG but nowhere to unload it, because the buoy and terminal are two months behind schedule. If all goes well, the LNG is supposed to be unloaded later this week.

LNG is expensive but is needed in part to replace Egyptian natural gas supplies, which were cut off after Arab Spring demonstrations in Cairo started and President Hosni Mubarak was deposed two years ago. Only once the Tamar offshore gas field comes online will the LNG no longer be needed.

The decision to set up the LNG terminal was made a year and a half ago in the wake of the Egyptian gas cutoff, and the depletion of the Tethys Sea gas supply. As a result, the Israel Electric Corporation was forced to burn much more expensive, and polluting, diesel fuel and heavy fuel oil.

Global prices for liquefied natural gas are rising toward record highs this year as increasing demand runs up against stuttering supply, threatening to drive up fuel costs in some of the world's biggest economies. After a record, unexpected, drop in LNG output in 2012, production is expected to grow only marginally this year. Demand, meanwhile, continues to march higher, driven by energy-hungry Asia's rapid economic growth, Japan's near total shutdown of its nuclear industry and a drought in Brazil that has forced the South American nation to buy emergency fuel supplies at high prices.

With 80 percent of global LNG supplies locked up under long-term contracts, it is countries that rely on short-term deals - such as Brazil, Argentina, number two economy China and India - who could face the biggest hit. LNG helps bridge fuel supply gaps in countries where domestic output fails to keep up with demand. The intricate process of liquefying gas, shipping and regasifying the fuel can also make it more expensive.