27-09-05 Spot prices of Liquefied Natural Gas (LNG) have surged to record highs as Hurricane Katrina hit US natural gas output while LNG projects in Nigeria, Australia and Egypt suffer production problems, further impacting the market. An LNG cargo to be delivered into the United States was reported sold at a record high of $ 9.50 per mm Btu, reflecting a surge in US gas prices after the hurricane slashed output in the Gulf of Mexico.
"You can't get cargoes for love nor money. These outages aren't helping they have taken any of the slack out of the system," said Frank Harris at Edinburgh-based consultants Wood Mackenzie.

Most LNG gas cooled into liquid form for transport by tanker is sold on long-term contracts but the spot market is growing as producers look to respond more quickly to changes in demand and surges in gas prices.
The LNG plant problems mean between 22 and 24 cargoes have been lost in the August-September period, equivalent to nearly 1.6 mm tons of LNG, said industry newsletter Waterborne LNG.

Japanese utilities are reported to be willing to pay $ 12-$ 13 per mm Btu, about double the price they paid for cargoes in July as they look to replace cargoes from Australia.
"Japanese buyers are, for the first time this year, showing a serious need for spot LNG," said Waterborne LNG.
Australian oil and gas producer Woodside said it would lose nine cargoes because of the closure of one of its four North West Shelf processing trains. Most of these shipments were due to go to South Korean and Japanese customers.
"Japan has nuclear problems and hydro is down. Even burning gas at $ 12 in an efficient power station is better than burning oil," said independent analyst Andrew Flower.

According to Waterborne LNG, five cargoes were lost in August from Trinidad where LNG output was reduced for maintenance and repair work. The Nigeria LNG plant was shut in late August after a leak on its main supply pipeline passing through Okrika and is due to reopen although industry sources say this would be delayed until late September.
The Nigeria LNG was forced to declare a force majeure, leaving a loss of about 12 cargoes because of the problems in Nigeria.

In Egypt, the new Segas plant is reported shut for three weeks maintenance. The plant opened in January but has yet to reach its design capacity of 5.3 mm tpy because of teething problems, industry sources say. According to Wood Mackenzie's Harris, a global price is emerging for short-term LNG trades, based mainly on prices in the liquid UK and US gas markets and on those in Spain, an increasingly important European LNG consumer.
The problem for Asian buyers is that there is no reference price in their region, so their purchases are based on European and US prices with allowance for freight costs.