Low prices for US natural gas have attracted another Asian buyer. Korea Gas Corp. has signed a 20-year contract with Cheniere Energy Partners L.P. (AMEX: CQP) to take 3.5 million metric tons of liquefied natural gas (LNG) annually beginning in 2017. Cheniere signed a similar deal with GAIL India Ltd. in December and already had sales agreements with Britain’s BG Group plc and Spain’s Gas Natural SDG SA.
Korea is the world’s largest importer of natural gas, and the contract with Cheniere sets the price at a premium to the price at Henry Hub, the central US delivery point. The advantage to importers is that US natural gas prices are far lower than prices for LNG from any other source.
LNG pricing has traditionally been tied to crude oil prices, which has helped the development of large LNG projects in the Middle East and Australia. These massively expensive projects could suffer if Cheniere and other potential US LNG exporters obtain the required permits and licenses.
US natural gas prices are down again today at around $2.53/thousand cubic feet. That’s nearly -7% lower than yesterday’s closing price.
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