PERTH (Bloomberg) -- The Woodside Petroleum Ltd.-operated North West Shelf Venture, Australia’s biggest liquefied natural gas producer, said the global recession has “softened” the market for LNG and signs for the future are mixed.

The global economic crisis has had “a dramatic” effect, Peter Cleary, president of North West Shelf Australia LNG, told the LNG World conference in Perth on Monday. “Severe downturns in industrial production and associated energy consumption have impacted demand for all forms of energy and LNG has not escaped.”
Japan and South Korea are cutting LNG purchases because of reduced demand for electricity. Asian LNG demand may drop by as much as 10 percent this year, New York-based Poten & Partners said in March. The Asian spot market for LNG cargoes for immediate delivery, particularly in Japan, has almost “disappeared,” Cleary said.
“In the latter part of last year and the first part of this year there’s been an incredible reduction in demand in the market from the Asian region,” Cleary said. “Long-term buyers are making use of much of the flexibility they have in their long-term agreements to help balance supply and demand.”
Japanese LNG imports declined 9 percent in June from a year earlier to 5.16 million metric tons, while South Korean imports dropped 1.4 percent to 1.46 million tons.
-----------Long-term ‘secure’
The North West Shelf, whose partners include BP Plc and Woodside’s 34 percent shareholder Royal Dutch Shell Plc, will sell about 9 percent of its LNG volumes on the spot market, Mark Greenwood, a Sydney-based energy analyst for JPMorgan Chase & Co., said earlier this year.
The long-term future of LNG is secure because it’s cleaner burning than rival fossil fuels such as coal and it has transportation advantages, Cleary said. More than a dozen LNG projects are proposed in Australia and Papua New Guinea by companies seeking to tap a forecast increase in demand in north Asia for cleaner-burning fuels.
Australia’s LNG production may eventually jump fivefold to 100 million tons from 20 million now, Cleary said.
The North West Shelf started up a A$2.6 billion ($2.1 billion) expansion in August, increasing capacity by 37 percent to 16.3 million tons a year. The A$25 billion venture has multi- year sales contracts with buyers in South Korea, China and Japan.
BHP Billiton Ltd., Chevron Corp. and a unit jointly owned by Mitsui & Co. and Mitsubishi Corp. have stakes in the North West Shelf. LNG is gas chilled to liquid form for transportation by tanker to destinations not connected by pipeline.