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LNG could hit US$40

Thursday, June 26 2008

As the world thirsts for LNG Trinidad and Tobago stands to benefit as prices go up, according to Dr Ranato Bertani, the former president of Perobas America, a subsidiary of the Brazilian energy giant.

Speaking at an energy luncheon hosted by First Citizens at the Hyatt Regency, Port-of-Spain, Bertani, now president of Thompson and Knight, Global Energy Services, a legal firm that has an appetite for energy deals, predicted that at the present rate of demand LNG prices could hit US$40.

He said this was possible given the fact that energy demand across the globe was rising.

“That is good business for Trinidad and Tobago,” he said of the LNG prices increase.

He pointed out that there could eventually be a convergence of oil and gas prices, if the global energy dynamics don’t change.

The theme of his address was, “The Risks and Opportunities in the Energy Sector.”

According to Bertani, the world will have to spend US$20 trillion by 2030 if it is going to meet the demand for energy.

LNG prices on Monday stood at US$13.23, according to Bloomberg, while oil was at US$137 a barrel. “Oil prices are not going to come down to gas prices but gas will get closer to oil,” he said.

Using a diagram to show the changes in LNG flow, he pointed out that in 2030 the US and Asia will see a significant increase in LNG usage.

He said although there are security concerns across the US regarding the use of LNG, he said they will soon have to re-examine this stance given that the price of oil is rising. He said for a gas economy like TT, this was good news because a market was going to be assured.

He said there could be converge of oil and gas prices and where gas would become a major player in the global energy scenario.

Noting that there could be more demand for LNG from developing countries in the next ten-20 years, Bertani said the supply of LNG will reach the consumer in different ways. His view is that in addition to oil, LNG will play a more significant role in the US energy portfolio, saying that the spot market for LNG will increase.

Such a market occurs when an LNG buyer takes the LNG at an agreed price from a supplier and sells it on the open market to the highest bidder.

He said with LNG prices increasing, this was a possibility and said that this could carry prices further up.

On oil and the world’s demand for it, Bertani said this was not going to change soon. He took the view that the world’s ceiling for oil can be sustained in the US$140- US$150 bracket, adding that after that it becomes unsustainable.

He said at such a price, companies are looking at going after oil that was once considered unattainable.

“There is now pressure to explore and extract,” he said, noting that for oil companies it was now possible to take the risk.

Giving a global overview on energy, he said developing countries like China and India and their increased energy demand is what is pushing up the price of oil. On ethanol, he said this was extremely lucrative and profitable and stressed that with massive tracts of land, the Caribbean could reap the benefits.

To back his case, he said the world consumes about 20 billion tonnes of gasolene a year with half of that being consumed in the US. Stressing that this was a huge opportunity for the Caribbean, Bertani said ethanol coming from the Caribbean into the US would face no tariff.

He said in the case of Brazil, the US has imposed a tariff on ethanol coming into the country.

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