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Australia's Santos Advocates Necessity For Oil-Linked LNG Pricing
=Forecasting that LNG from North America will have little influence on Asian market
Santos Ltd., which has developed LNG projects mainly in Australia, on March 6th advocated the necessity for oil-linked LNG pricing in handouts for address it gave in Singapore. The company claimed that setting proper prices is necessary for sustainable LNG development and oil-linked LNG prices have made it possible.

Santos explained that the reason why LNG price-setting linked to crude oil prices has last for more than 40 years is because crude oil market, based on which LNG prices have been fixed, is deeply liquid market. Asian customers are fully aware of the circumstances.

The company also showed its view that it is reasonable to have LNG prices linked to the substitute oil prices, taking into consideration the situation where oil is often the alternative fuel for many LNG importing countries. It expected to see long-term oil-linked LNG pricing into Asia.

On the other hand, with progression of shale gas exploration and exploitation, several LNG export projects have come up in the United States. Asian buyers such as Korea Gas Corporation (KOGAS) and Gail (India) Limited have already concluded contracts that link prices to the U.S. benchmark known as the Henry Hub.

There is an opinion that influx of low-priced LNG linked to the Henry Hub into Asia will form global market place for LNG in the region.

However, Santos raised a few questions about LNG from North America.

- How much of LNG from North America Asian buyers will allocate among supply volumes from their procurement sources?

- How much more of LNG will come out of North America?

- What volumes will be absorbed by portfolio players like UK's BG?

It suggested that LNG from North America will have little influence on LNG market in Asia. Santos insisted that the buyers want to supply diversification, which will give buyers long term energy security, and will not place a disproportionate emphasis on some specific supply sources.
last modified : Tue 13 Mar, 2012 [11:51]
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