Rupees and Yuan for Natgas

Many North American observers think the natural gas market has gone slack. But a global view suggests this commodity is tighter than ever.

The past week, both India and China raised their domestic natgas prices. In a bid to attract needed supply.

Indian natural gas will double. To $8.40/MMbtu.

Chinese gas will see a milder increase. Existing consumers as of 2012 will see their natgas jump by an average 15.4%, to $8.90/MMbtu across the country.

The more radical part of the Chinese re-pricing involves new gas supply. Going forward, new consumers will pay an average 42.3% premium for their gas. Implying a price around $12.67/MMbtu.

This higher pricing will reportedly affect about 9% of total Chinese gas supply this year. But the pricing system is expected to take wider root as time goes on.

All of this is great news for producers, shippers and importers. Several Indian-focused natgas companies saw their share prices jump on news of the price hike.

It also shows just how competitive the natural gas market is. Importers are realizing that with LNG cargos selling for +$15/MMBtu, they simply can’t afford to have a domestic price that’s completely out-of-whack with global levels.

An interesting aside to all this is the coal story. Natgas prices are increasing for gas-fired power generators. Meaning that coal is going to become more and more competitive for the electric sector.

Could be a further tailwind for the Asian thermal coal market.

Here’s to the price being right,

Dave Forest

dforest@piercepoints.com / @piercepoints / Facebook

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