New York, May 01, 2013 -- US energy companies will benefit from the US becoming an exporter of liquefied
natural gas (LNG) over the next several years, says Moody's
Investors Service in the report "The Prospect of US LNG Exports
Influences Pricing and Gas Markets Worldwide." Those who
will gain the most from the US exports, however, will be buyers
in Japan and Korea, the world's largest LNG consumers.
"Buyers in Japan and Korea will have widening supply options,
in addition to new supplies from Australia," says Mihoko Manabe,
a Moody's Vice President -- Senior Credit Officer. "They
will benefit from the increased quantity and diversity of their gas supply,
as well as a stronger negotiating position when signing up to new contracts."
Examples of the buyers likely to benefit include Tokyo Electric Power
Company, Inc. (Ba3 corporate family rating with negative
outlook) and Korea Gas Corporation (A1 with stable outlook).
Sectors that will face greater competition from the US LNG exports include
the Australian LNG producers, who will need to compete harder for
future projects to supply their targeted Asian buyers. These include
Woodside Petroleum Ltd (Baa1 with stable outlook) and BHP Billiton Limited
(A1 with stable outlook).
In addition, European gas wholesalers face ongoing pressure from
increased supply in the short-term gas market, which reduces
spot prices and squeezes margins.
Moody's does not expect US LNG exports to be a ratings-changer
for most of the players involved. With the highly visible exception
of Sabine Pass Liquefaction (Ba3 with stable outlook), LNG will
remain the domain of big, highly rated companies, and expensive
LNG export facilities take several years to build. Sales will continue
to be made under decades-long agreements, allowing players
to adjust to shifts in market conditions gradually.
In the US, 20 applications to export LNG await US Department of
Energy (DOE) approval. Moody's expects at most four of these
projects to be built. Mostly likely to move forward are those positioned
near the top of the DOE's list for approval, as well as projects
in brownfield locations, which have a cost advantage, because
they already come with some necessary infrastructure. For the most
part, those that move forward will be backed by companies with investment-grade
balance sheets and substantial experience in the LNG business.
Moody's expects US LNG exports to be minor during this decade,
as the Sabine Pass LNG export project is expected to begin operations
in 2015, with others to be completed in 2018-19.
Most Canadian exports will not start until after 2020, says Moody's.
In Canada, three projects have requisite government approvals,
but have yet to secure the commercial agreements and pipeline infrastructure
needed to move forward.
The new exports will mainly target Asia, and compete directly against
rising production from Australia, which has projects under construction
that will be adding enough export capacity between 2014 and 2017,
overtaking Qatar as the largest LNG producer.
On the demand side, Moody's expects Japan to remain by far
the largest importer of LNG, accounting for roughly a third of the
global LNG market. South Korea will hold steady as the second-largest
importer, while China will ramp up its imports almost to the level
of Korea's by 2020.
For more information, Moody's research subscribers can access
this report at http://www.moodys.com/research/The-Prospect-of-US-LNG-Exports-Influences-Pricing-and-Gas--PBC_151819.
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Mihoko Manabe
VP - Senior Credit Officer
Public Proj & Infrastr Finance
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
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MD - Utilities
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Moody's: US energy producers and Asian buyers primary winners from potential US LNG exports