El Paso, which also is considering an LNG plant off the coast of California, signed a deal in January with Indonesia's state oil company, Pertamina, to explore opportunities for shipping LNG to the US.
"Indonesia is one of the potential suppliers, but we're also talking to Petronas and people in Australia," said David Bradley, senior vice president of El Paso's Asian LNG supply, who added that supplies also could be sourced from South America.
US demand will add a new element to a market that has until now been dominated by North Asian buyers.
"The Japanese and [South] Korean buyers have essentially dominated the market until now. But now there could be an alternative, and that will be Mexico and the West Coast of the USA," Shell's Bounds said.
Relationship-based contracts
Regional Asia-Pacific LNG business has traditionally existed under long-term agreements of 20 years or more giving supplier and consumer security in the market.
"Contracts with US buyers will be shaped by US law, while the Japanese and the Koreans look for more relationship-based contracts. That's going to be a new challenge for the region as a whole," said Bounds.
Cargoes crossing the Pacific could be priced on a netback from the local market with US gas futures used for hedging. Most Asian LNG trade is priced on netbacks off North Asian markets and linked to an oil price indicator, Bounds said. While US buyers may prefer short to medium-term contracts, long-term deals will remain the backbone of the Asia-Pacific market with North Asia the major buyer, analysts said.
However, Peter Best, oil and gas analyst at CSFB in Hong Kong, said US demand may speed up the slow trend towards more flexible terms and spot trade by merchant players.
"The entry of activity by merchant players would promote the emergence of a more fluid market," Best said.
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