Liquefied natural gas (LNG) exports into the U.S. will be lower this summer, due to increased demand in Asian markets, according to a recent report by Paris-based investment-banking firm Societe Generale.

“Higher prices for LNG in Asia mean summer 2008 movement of LNG to the U.S. may be lower this year, despite the increased regasification capacity of U.S. terminals,” Ashley Wilkins, head of capital raising, said at an energy-finance program in Houston. “China and India have demonstrated an ability to agree to high market prices.”

According to Société Generale’s data, daily Asian demand will grow to about 22 billion cubic feet in 2020, up from about 13 billion in 2005. “There will be a great sucking sound for energy from China,” he said.

Some of the increased demand will be used as a substitute fuel for coal. Coal prices have reached all-time highs due to strong inelastic demand from China and India and supply disruptions due to South African power shortages, Indonesian heavy rains, and Australian heavy rains and infrastructure bottlenecks.

“LNG continues go to where the economics make sense,” said Wilkins. “The U.S. is an LNG-importing country that is based more on profits than necessity,” he said, while Asian markets will pay higher prices to ensure stable supply. “With a Japanese spot cargo rate at $19 per million Btu, only 1% of the world’s LNG fleet went to the U.S. in January 2008.”

LNG terminals may suffer overcapacity issues this year when four U.S. regasification terminals, one expanded facility, and terminals in Mexico and Canada come online. “The U.S. is going to have a very difficult time attracting the LNG into that overbuilt capacity,” he said. “The U.S. is in a situation where it will need to attract LNG via price rather than being the summer sponge,” he said.

The U.S. has more gas-storage capacity than Europe and has enjoyed lower prices when “off-season gas” finds its way to U.S. terminals that have associated salt cavern or depleted reservoir storage nearby.

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