Global LNG-Supplies ease on African tender spree

Fri Aug 23, 2013 1:20pm EDT

* Algerian spot to mid-term tenders attract attention

* BG Group, Petronas win two cargoes from Nigeria tender

* Fourth Angola cargo rumoured before shutdown

* Trinidad offers two September cargoes

* Shell delivers first shipment to Israel

By Oleg Vukmanovic

LONDON, Aug 23 (Reuters) - Liquefied natural gas (LNG) spot prices fell to $15.30 per million British thermal units (mmBtu) this week as African suppliers pumped out more cargoes in a spree of tenders aimed at Asian and Latin American buyers.

Asian LNG prices were pegged in the mid-$15/mmBtu level last week.

Higher output from Algeria, Nigeria and Angola marks a turnaround from a period of volatile output in recent months.

A three-week naval blockade of Nigeria's Bonny Island production facility crippled exports last month, but output has rebounded since and its first free-on-board tender has been successfully concluded.

Malaysia's Petronas and BG Group have each won a cargo from the facility loading in early September, according to trading sources. The exact price levels were not immediately clear.

Angola's new LNG plant also appears to have surmounted recent setbacks after exporting a third cargo, amid talk that a fourth cargo may be imminent before the facility shuts down for diagnostic tests.

Angola's first cargo sailed to Brazil. The second was sold in a tender process to Chevron, the plant's operator, which then re-sold it to China National Offshore Oil Corp. for around $16.20/mmBtu. Chevron is said to have paid $16/mmBtu for the cargo.

Angola's third cargo is currently heading to Japan.

But it is Algeria that has dealt traders the biggest surprise with a spree of tenders for spot and medium-term LNG supplies in recent weeks.

Algeria's state-run energy firm Sonatrach has launched several liquefied natural gas (LNG) sales tenders including for single cargoes, a six-cargo strip from October and a 12-month supply commitment, trade sources said.

Three tenders offered to global buyers is unusual for Algeria where falling gas production and a lack of upstream investment has reduced LNG output in recent years.

But the country's LNG output may rise after officials agreed to scale back piped gas deliveries to Italy, signalling a shift in export strategy for Africa's biggest gas producer.

Japan has relied heavily on LNG to make up for the nuclear power capacity it lost after the 2011 tsunami, but utilities have recently been ramping up coal use to cut costs.

A total nuclear blackout in September is expected as the country's last two atomic plants shut down for safety checks, which may lead to an increase in demand for alternative fuels, including LNG.

Safety incidents at nuclear power plants in the last few years have created a growing crisis of confidence in nuclear energy in Japan, South Korea, and Taiwan, the world's three largest LNG buyers.

In the latest safety crisis, Taiwan said its nuclear power plant may have been leaking radioactive water for three years.

South Korea's nuclear industry has become embroiled in scandal after finding forged safety certificates on parts.

In the Americas, Trinidad has launched a sell tender for two cargoes loading in September, while Latin American countries' demand for the fuel continues to march higher.

"Argentina, Brazil and now Mexico have become a major driver in the spot LNG market, since the majority of their LNG imports are purchased no more than a year in advance," analysts at Houston-based energy consultancy Waterborne Energy said.

"Transatlantic re-exports have increased 327% year on year in August, with 12.34 billion cubic feet re-exported from Europe to Latin America," Waterborne said.

Re-exports occur when a cargo initially imported into a European terminal is loaded back onto a different tanker for onward transport to a higher-paying market.

The practice has become increasingly popular since gas prices in Europe have diverged dramatically with Asia and Latin America, which is struggling to cover its growing energy needs.

This month almost 10 percent of western Europe's total imports of LNG were re-exported to Argentina and Brazil, figures show.

In Europe, Shell delivered its first LNG cargo to Israel's floating LNG terminal at Hadera after BP's 10-cargo deal to supply the country expired earlier this year.

The first commissioning cargo for Italy's floating offshore import terminal Toscana LNG is expected to arrive before the end of the month, Waterborne said.

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