Canadian exports of LNG to Asia seen as enormous opportunity

The huge price differential between Canada and Asia presents opportunities for Canadian exports of liquefied natural gas (LNG), speakers at the Asian Financial Forum in Hong Kong said.

"If Canada exports LNG to Asia, the potential for arbitrage is enormous. The price of gas and oil in Asia is significantly higher than Canada. It's an incredible opportunity for banks," said Kevin Lynch, vice-chairman of BMO Financial Group, a North American financial services firm.

Last year, the natural gas price in North America was US$3.71 per million British thermal units (Btu), much cheaper than the natural gas price of US$16.45 per million Btu in South Korea and Japan, Lynch cited.

The arbitrage opportunities for oil and gas traders leveraging the huge price gap between the two continents would be very lucrative for energy market players around the world.

A Credit Suisse report last year said Asian buyers were paying about US$15 per million Btu on long-term supply contracts with prices partially linked to that of crude oil. After deducting procurement, liquefaction and shipping costs, buyers are paying an "Asian premium" of about US$4 per million Btu, it said.

On July 10 last year, the Chinese government raised the price of natural gas on the mainland to 1.95 yuan (HK$2.48) per cubic metre or US$8.56 per million Btu, reported Xinhua.

From now until 2035, China's energy demand will soar 60 per cent and surpass US demand, Lynch predicted.