LNG spot prices to spurt as Shell diverts stocks to Japan

Liquefied natural gas (LNG) prices are expected to spurt as leading producer Royal Dutch Shell plans to divert large quantities to Japan to help meet its energy needs following the closure of its nuclear power plants.

Peter Voser, chief executive, Royal Dutch Shell, said the petroleum major was supplying additional LNG and low sulphur fuel oil to Japan to help tide over its crisis.

This could lead to a rise in spot LNG prices. The company owns 30 per cent in a new LNG production facility in Qatar, besides a few projects in Australia.

Deutsche Bank estimates that between 5 and 12 billion cubic metres of LNG per year could be redirected from Europe to Japan, pushing up spot prices of the gas. ''This could be a game changer for the EU gas market, which has been over-supplied in the last two years, and which has an overhang of at least 10 Bcm -- and potentially as high as 30 Bcm -- to make up over the next few years,'' the bank said in a research report.

Japan's gas terminals have not been damaged by the earthquake and the tsunami; the German bank expects Japan's LNG imports to rise between 340,000 tonnes and 736,000 tonnes every month.

Shell CEO Voser said its refining assets in Japan were also not damaged in last week's earthquake and the ensuing tsunami. While admitting that the markets were volatile because of the crisis in Japan and the unrest in the Middle East, the Shell CEO does not expect oil and gas prices to decline on a long-term basis, as a growing population, improved standards of living and a lag in investments in new assets would cotninue to drive energy prices.