Price Spike Shows "Fragility" of Northeast Asian LNG Markets: APERC
The spike in gas prices in Northeast Asia near the end of 2020 and in early 2021 has highlighted the "fragility" of the region's LNG markets, a report by researchers at the Asia Pacific Energy Research Centre (APERC) states.
A number of factors created a "perfect storm" in the region's gas markets, causing LNG spot prices to soar tenfold in mid-December to a record high of over $30/mn Btu. These factors included a cold snap, limited nuclear output in Japan, record high demand in China, constraints on coal-fired generation in Korea, lower LNG inventories and liquefaction plant outages in Australia and Norway.
Cargoes from across the world headed to Northeast Asa amid the supply crunch, causing congestion at the Panama Canal. This led some LNG vessels coming from the US to opt for alternative and longer routes. These factors led to charter rates surging to nearly $200,000/day, over triple the rates seen four months earlier.
Prices had recovered to the early December level by the end of January. But "this short-lived crisis highlighted and evidenced once again the fragility of LNG markets in Northeast Asia, creating an opportunity on how to develop relevant infrastructure and policies to reduce volatility and exposure to unexpected conditions which could jeopardise energy security," APERC said in its Gas Report 2020. This volatility drew attention to the region's lack of gas storage, among other infrastructure limitations, the research centre said.
A copy of APERC's Gas Report 2020 can be read here.