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Japan crisis may push LNG prices higher

New Delhi, 21 March, 2011

The aggravating Japanese nuclear crisis is likely to make procurement of LNG pricier for Indian players, as Japan is expected to rely more on gas and coal to meet its energy needs in the short term, says a Crisil report.

Rating agency Crisil today said that Asian spot LNG prices are expected to go up in the short term due to power generation disruptions in Japan.

"Spot LNG accounts for around 8 per cent of the total gas demand in India and its consumers include city gas distribution, captive power plants and small industrial units.

"The gas acquisition costs of these entities are likely to increase, thus affecting the demand," Crisil said in the report titled Japanese Earthquake and Tsunami:Impact Analysis. A devastating earthquake followed by massive tsunami last Friday took a severe toll on people, properties and some nuclear plants in Japan.

As per the report, the plants that have been shut down subsequently represent an estimated 25 per cent of Japan's nuclear power capacity.

"The shortfall in demand will have to be met by coal and LNG-based capacities, thus resulting in higher imports of coal, LNG and petroleum products (by Japan)," it said.

Crisil noted that it expects about 60 per cent of the shutdown power capacities to be substituted with coal-based capacities, while LNG-based capacities will make up for the rest.

"International LNG prices have been on the rise following the natural calamity in Japan. Prices have jumped from around USD 9 per mmBtu to around USD 11-12 per mmBtu due to increased demand from the country," the report said.   

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