While the world tries to keep up to date with every World Cup match, you might not realize that the world’s most popular sporting event is actually having a dramatic effect on the global market for liquefied natural gas (LNG).
You see, Brazil, like many other emerging countries, has problems with consistently keeping the lights on.
And since Brazil gets about 70% of its electricity from hydroelectric power, the situation was made even worse this year by the severe drought in parts of the country.
Indeed, the drought lowered water supplies in some areas to near-critical levels.
And since Brazil feared that hydroelectric power may not be available during the World Cup – and it didn’t want to be embarrassed on the world stage – it turned to another energy source to make sure there would be enough power.
That energy source is LNG.
Brazil’s Record LNG Imports
Brazil’s energy giant, Petrobras (PBR), has bought record amounts of LNG on the spot market so far this year.
Brazil didn’t begin importing LNG until 2009. In 2013, LNG imports shot up 54% to 4.2 million metric tons (mmt).
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But this year, LNG import figures will easily surpass that. Petrobras is predicted to import 21 million cubic meters a day of liquefied natural gas. That’s the equivalent of about 5.7 mmt of LNG annually.
The amazing thing is, Brazil didn’t even care what price it paid for the LNG. It just needed a power source to avoid embarrassment (like an own goal in soccer).
In February, Petrobras was paying as high as $18 to $19 per million BTUs.
That drove up the price for other countries around the world. Some Asian countries, for instance, ended up paying what the Brazilians paid – or even more.
LNG prices in Asia moved north of $20 per million BTUs in mid-February, although the price has fallen back a few dollars since.
Bottom line: The globalization of the natural gas market is here. Heck, even the World Cup now has ramifications in that market. The globalization of LNG will only grow, too, as more exporters – including the United States and Canada – enter the marketplace.
And “the chase” continues,