Japan can't count on Atlantic Basin LNG relief

Atlantic Basin liquefied natural gas producers that rushed fuel to Japan after a powerful earthquake in 2007 may be unable to provide rescue this time as a shipping shortage makes long voyages inviable.

Suppliers in the Middle East and Asia Pacific will instead carry the weight of a potential extra 1 billion cubic feet of gas per day needed in Japan after last week's devastating quake knocked out 9 gigawatts of domestic power supply.

The power outages are greater than in 2007, but a lack of available ships will make it hard to send significantly higher volumes to the world's top importer from the Atlantic Basin.

"A tight shipping market will make things difficult (from the Atlantic). Without available ships, it will be hard to make deals," said Charles Martin, director of research at Waterborne LNG analysts in Houston.

In July 2007, an earthquake shut the 8.2 GW Kashiwazaki-Kariwa nuclear plant. In 2006, supply from the Atlantic was about 300,000 tonnes per quarter, according to independent LNG analyst Andy Flower. Deliveries rocketed to 1.8 million tonnes by the first quarter of 2008, the equivalent of about 30 cargoes.

Since then, increased global production and more chartering of tankers by major players have left little flexibility for producers in Nigeria, Trinidad and Norway to make many journeys from the Atlantic to the Pacific, the round trip for which is at least 40 days.

"It looks unlikely that cargoes will be diverted from the Atlantic. The shipping market is so tight that it would require quite a bit of stretching on everyone's portfolio to be able to move cargoes around," one European LNG trader said.

Increasing tanker rates will also make deliveries across the globe increasingly expensive. One LNG broker said charter rates, which were at USD 65,000 per day before Friday's quake, are likely soon to rise to about USD 70,000 on tighter shipping. Last summer, rates were as low as USD 30,000.

Pacific supply increase

Instead, Pacific Basin suppliers will be left to do the heavy lifting. They have promised increased supply to Japan as the world's third-largest energy consumer scrambles to find alternative fuel supplies.

Suppliers in Russia, Australia and Indonesia, as well as top exporter Qatar, have said they will supply extra cargoes to

Japan. Number-two importer South Korea is looking for ways to get extra volumes to Japan via swap deals, one source said.

"There is a lot of sympathy, a lot of people have lost their lives, whereas the previous earthquake did not have as much of an impact on the people. The producers are rallying round," Andy Flower said.

"They will not need to move as much LNG from the Atlantic Basin this time," he said.

It is as yet unclear how much extra LNG will be required, or whether other importers from Pacific Basin and Middle East suppliers, such as Taiwan, South Korea and Spain, will have their own deliveries disrupted.

UK gas prices have risen this week on the expectation that its number-one LNG supplier, Qatar, will send more LNG to Japan in the coming weeks.

Any change in Qatar supply will affect gas markets across the globe. Qatari volumes have arrived in markets as far afield as Canada and Argentina in recent months, which could fall if Qatar decides it needs to send LNG elsewhere.

However, new production units in Qatar alone will help keep the market amply supplied, analysts have said. Two new, huge

Qatari trains are ramping up to full production and if needed could be able to meet much of the increased demand alone.