|Tewesh Mishra / New Delhi March 01, 2021
The availability of all contract options now compared to earlier can help in dealing with the fluctuations in LNG prices. This could be an approach to reassure consumers that as of January 2021, LNG prices will not hinder prospects of more and more adoption of natural gas.
Ajay Shah, vice president of Shell Energy Asia, told Business Standard, “These days you have spot, short-term, long-term and alternative contracts. There are also contracts that are for one cargo while some other contracts are for up to 100 cargo. Not only this, we also have indices. Now the options are much more than before as contracts were used to supply gas from one place to another. These types of contracts were done for a fixed quantity and the price was tied to the price of crude oil. Shah was replying to a question in which he was asked how the increase in LNG prices could affect customers. He said, ‘JKM (Japan Korea marker) is the spot marker for Asia but now we also have WIM (West Asia marker). There is also interest in sellers and buyers to talk about various indices. ‘ Shah is the head of Shell Energy Asia and is responsible for shaping and giving strategic direction to Shell’s business across Asia.
The spot price of LNG reached a record high in January 2021. The price of natural gas in the spot market is largely represented by JKM. Delivery LNG prices rose to $ 32 per MMBtu (million British thermal units) in February.
According to Shell’s LNG Outlook 2021, the demand for LNG is increasing and by the middle of this decade there is likely to be a gap between demand and supply as new projects will reduce production significantly.