When the Mideast War ends, LNG demand is expected to increase in China and India

Industry executives predict that China's and India's LNG imports will rebound from their multi-year lows when the Middle East supply crisis ends and if prices ease. This is expected to reverse a resurgence in the use of coal and oil to generate electricity?due to the U.S. - Iran war.

Qatar and the United Arab Emirates are no longer able to export most of their LNG through the Strait of Hormuz. A fifth of the global supply used to go via this route, which drove up prices and slowed demand in Asia.

Shell's President for Integrated Gas Cederic Cremers estimates that the Middle East has exported about 36 million tonnes of LNG to the rest of the world so far this calendar year.

Asia's spot price has risen to nearly $30 per million British Thermal Units, up from an earlier range of around $10 per MMBtu. The region is now competing with Europe over limited supplies before winter.

Deepak Gupta, Chairman of GAIL, said that the prices have risen dramatically in India. This is because many sectors are sensitive to price.

Gupta, India's top natural gas distributor based on market share, said that many industries switch to other fuels when gas isn't viable.

Since the start of the war, both GAIL and PetroChina - China's largest LNG importer - have sent their trading teams out to search for alternative cargoes that can replace Qatari or Emirati supplies.

DEMAND DESTRUCTIONS NOT PERMANENT

Luo Yizhou said that the PetroChina International trading arm, the state energy giant, was working the 28th of February in lieu of Lunar New Year holidays when Israel and the U.S. launched an attack on Iran.

Luo explained, "We were in a meeting to discuss something else, like planning for the year. Then we heard the news and we changed the subject to supply security."

We were probably a day ahead of the market, because many other companies begin their work on Monday.

GAIL's Gupta stated that India initially had to limit its gas consumption but has since resumed supply to between 90% and 95% after increasing its trading capabilities to buy LNG from other countries.

GAIL and PCI executives both expect that the Middle East conflict will have a temporary effect on?demand? in their countries.

Gupta said that the prices could drop by up to 150 to 200 millions tons if LNG is brought online within the next four or five years.

He said that "the sectors such as the power sector, the various industries will go for more gasoline... because it's a cleaner-burning fuel."

Luo, of PCI, expects that demand for gas-fired plants will rebound in China once the price of?LNG returns to "normal" levels between $7 and $9 per MMBtu. He cites strong growth in electric consumption, even though LNG imports are down.

Luo stated, "I believe it is because of the temporary suppression in demand caused by the high price."

"I don't believe it will kill demand in China."

(source: Reuters)