"Asia is a growing market and the region will need to import more naphtha in the future," said Liutong Zhang, senior analyst of East Asia at FACTS Global Energy. "Importers will need to source their additional requirements from somewhere else and they may be forced to import from long-hauled regions like Latin America. This change in trade flows creates excellent business opportunities for the traders." FACTS projects total Asian demand next year to reach 3.68 million barrels per day (bpd) with a net supply deficit of 1.0 million bpd, versus 2010 demand at 3.47 million bpd against a net supply deficit of 990,000 bpd. In the first half this year, Asia received from the West nearly 2 million tonnes of naphtha, or more than 300,000 tonnes a month on average, to make up for lower refinery runs and maintenance shutdowns. The imports matched last years volumes, but were marginally higher than in 2008.

Global LNG supply is expected to grow the next two years with the addition of six liquefaction trains with a combined capacity of 36 million mt (4.5 Bcf/d of gas), FACTS Global Energy consultancy said in a report this week. In addition, new trains that came online last year will continue to ramp up production this year, FACTS said. After falling 3% last year, Asian LNG imports are expected to grow 8% this year as the economies of the major importers are expected to improve while Chinese and Indian imports are expected to continue to grow, the report said. Although Japanese imports are expected to increase 0.4% this year and 2.3% next year, it could take four years for Japanese LNG imports to recover to pre-economic crisis levels, the report said. FACTS expects gas demand in South Korea and Taiwan this year to surpass 2008 levels, led by cheaper generation costs with LNG than with fuel oil and with increased electricity demand.

Given doubts over the demand recovery and potential for continuing glut, investors are adopting "a cautious wait-and-see approach," the IEA suggests. The result could be to bring tightness back before the end of the decade, at least in the Atlantic Basin, where no new greenfield LNG projects are approaching final approval. In consultants FACT Global Energys June Energy Briefs, Fereidun Fesharaki asks the same daunting question and concludes that the surplus will continue "for several years" but probably not "well beyond 2020 or even to 2025," as some would have it. Fesharaki rejects the view that glut will turn into shortage by 2013-14 — a view he says is "widely held by some exporters, IOCs (international oil companies), and even some key importers" — on grounds that 50 million tons per year of LNG from Australia and Papua New Guinea (PNG) will be entering the market mostly in the 2014-17 period, while another 30 million-45 million tons/yr of supply from Qatar and elsewhere could be diverted from the US and possibly UK.