Pavilion Energy, a Singapore-based importer and marketer of natural gas, has decided not to lift a scheduled cargo of liquefied natural gas (LNG) from the United States this month. Industry sources told Reuters on November 19 that Pavilion had agreed to pay for the cargo, even though it would not be loading it at the Cameron LNG plant in Louisiana as scheduled.
The company has attributed its decision to “scheduling and other commercial matters,” but Reuters said Pavilion was probably responding to an ongoing drop in Asian LNG prices. Under current market conditions, explained said, canceling cargoes and paying sunk costs such as liquefaction fees may be a more economical option for some buyers than proceeding with the lifting.
In the past, LNG traders have responded to low prices in Asia by redirecting their cargoes to Europe for loading into storage facilities. They are not doing so now, though, because European inventories are full.
“LNG cargoes in Europe are trading at deep discounts due to high storage and limited slots available to receive these cargoes ... plus shipping rates are quite high,” a Singapore-based trader told Reuters. “So canceling or not lifting U.S. cargoes is probably a way to minimize [the] loss.”