Asian economies are set to save tens of billions of dollars on their liquefied natural gas (LNG) imports thanks to the fall in oil prices, Reuters reported.
Prices of long-term LNG supplies delivered by tankers to countries in Asia are tied to the cost of Brent crude oil, which has fallen by more than 60% since June.
This means that the prices of LNG will also drop over the long term, analysts say.
“The fall in oil prices will slash the LNG bill for Japan, South Korea, China and Taiwan by over $35 billion in 2015 compared with prices in 2014,” Kwok Wan, head of the LNG desk at price reporting agency Argus, told Reuters.
The long-term LNG price is predicted to drop from the current $9 per million British thermal units (mmBtu), to under $8 per mmBtu, according to Thomson Reuters analysts.
Once the current cost of oil at $50 is fully factored into gas contracts, the long-term price could sink down to around $6.50 per mmBtu.
“If LNG is bought under an oil index contract buyers will make savings, not right away, but from the second-quarter 2015 the lower oil prices will feed into lower LNG contracted prices,” Societe Generale analyst Thierry Bros said.
