Long-term LNG contracts linked to oil are inflating Japan's import bill, Mitsunori Torihara, chairman of Tokyo Gas and the Japan Gas Association, said in Kuala Lumpur in June. Coupling gas prices with oil isn't “rational,” Shigeru Muraki, chief executive officer of Tokyo Gas's energy solutions unit, said Oct. 8 at a conference in London.

“Sellers and buyers, producers and consumers, need to discuss what is the best solution,” he said. The U.S. would need to export 150 million tons a year of LNG by 2020 to make a fundamental difference to global LNG pricing, compared with 95 million of planned projects, Neil Beveridge, an analyst at Sanford C. Bernstein in Hong Kong, said in an Oct. 5 report.

“While buyers may want to tear up their expensive long term oil-linked gas contracts, the reality is that it will not happen,” he said. “Although we expect the U.S. to export some LNG, it will not be of sufficient volume to enable buyers to walk away from existing contracts.”

Eoin Treacy's view Natural gas remains a game changer for the energy industry. The continued development of new supply is bolstering natural gas's credentials as a secure energy source. The fact that reserves are abundant, globally diverse and cleaner than oil all contribute to natural gas's credibility.

The arbitrage between the free market approach to pricing evident in the USA and UK compared to the oil-linked pricing everywhere else has tempted an increasing number of companies to seek US export licences. At present only Cheniere Energy has completed the full permitting process and is converting the Sabine Pass terminal. A number of others are waiting for permission.

I have previously highlighted export facilities, pipeline and LNG tanker companies as potential beneficiaries of US LNG exports but another avenue also presents itself. Panama is currently in the process of doubling the capacity of the Panama Canal and aims to have completed the project by 2014. This will allow larger ships and greater volume of traffic to transit the canal with obvious benefits for transport times for larger cargoes. Panama's government has a BBB- credit rating and its bond yield continues to compress. The benchmark 6.7% 2036 currently yields a little more than 4% and a sustained move above 4.5% would be required to question medium-term scope for continued optimism towards the country's prospects.