As an aside to the conversion to other liquids, we simply cannot underestimate the positive impact of LNG export sales.
There has been a lot of focus on local spot prices and economics of the project but the reality is that my earlier number will prove to be very conservative.
That article demonstrates once again the link between oil prices and LNG pricing as is demonstrated by the Asian market.
***LNG at $16/GJ is still more economical than $100 oil***
We look at the Asia spot of circa $11 and think that it is relatively high but in reality it is 25-30% cheaper for Japan to use LNG at these prices!
BPT have stated in recent announcements that their sales strategy is to sell into the local AND export LNG market. Also, I find their stated timeline of 2015 very interesting given that GLNG project will be operational at that exact time (read into this what you will, but joining the dots may provide some input as to future farm-in partners).
The significance here is that LNG Asia spot may be leveraged to the local market. Additionally, sales can be pushed through the local pipeline when prices are at a premium and/or to gain volume throughput for economies of scale. Win/Win!!!
Economies of scale play an important role here. Having such a large resource AND being geographically well located within the Asian region provides for cost efficiencies AND relatively high export spot prices.
I have overlayed the relative distance to market in the following chart. Ignore the cost as they are somewhat out of date but you can see the impact of distance on economics.
This is transport cost only but distance and volume result in savings throughout the entire supply chain.
The other big attraction for Japan and like markets is the relatively low cost of re-gasification.
Again, ignore the specific price and look at the volume/price trend. LNG is a very attractive proposition for the Asian market.
Short term SP fluctuations are always on the cards but the medium to long term outlook for NG/LNG simply has too may things going for it to be anything other than bullish.
The flow on effect for ADE is asset value and/or massive sales opportunities. ADE is fast becoming a very attractive target and cheap entry given the opportunity vs. MC!!!
Many positive scenarios starting to develop for this junior!
ADE Price at posting:
13.0¢ Sentiment: ST Buy Disclosure: Held
