Global LNG-Qatari maintenance, winter deals tighten outlook

Fri Nov 8, 2013 8:02am EST

* Chinese demand emerges as defining winter price signal

* Qatar's Rasgas Train 7 in maintenance

* Qatari winter deals touted with S.Korea, China

* Excelerate Energy in talks to supply Israel

By Oleg Vukmanovic and Rebekah Kebede

LONDON/PERTH, Nov 8 (Reuters) - Asian liquefied natural gas (LNG) prices rose this week on winter buying across the region and maintenance on one production line in Qatar, which some industry sources say has little spare capacity left until the end of winter.

Prices rose to $17.75 per million British thermal units (mmBtu) compared with around $17.50/mmBtu last week.

Chinese gas demand is emerging as one of the defining influences on winter LNG prices as state-backed buyers try to avert a looming winter supply crunch.

PetroChina launched a tender for the delivery of four cargoes last month, which it may have awarded to its term suppliers, such as the world's biggest producer, Qatar, sources said at the time.

Higher gas needs may also accelerate the commissioning of new import terminals in China, such as the floating terminal at Tianjin owned by China National Offshore Oil Corp., as well as Sinopec's facility in Shandong.

A number of sources said they believed that Qatar may have arranged for additional deliveries to China this winter, although details were scarce, while others pointed to a similar deal with South Korea.

"We hear that Qatar will ship additional cargoes to Korea [this winter]," said an industry source.

Qatar's Rasgas is to deliver the cargoes to South Korea even though the actual volumes will be sourced from sister company Qatargas, he said, suggesting that Rasgas temporarily lacks the spare capacity to make up for additional shipments.

One of the LNG production plants at Rasgas, Train 7, has shut for maintenance for most of November, a source at Qatar Petroleum said earlier this week.

A shutdown in November comes as winter heating demand in leading importers Japan, Korea and others is usually starting to rise, but as the work was planned it should not impact Rasgas' ability to meet its supply commitments.

South Korean power demand jumped after authorities closed nuclear reactors in response to an extended investigation of forged safety certificates, boosting demand for fossil fuels such as LNG.

Asian buyers with long-term supplies are increasingly leaning on these volumes, avoiding where possible high prices on spot markets.

In Europe, Excelerate Energy is in talks with Israel Electric Company (IEC) to deliver a strip of LNG cargoes following a tender for five shipments earlier this year.

The exact number of cargoes under discussion between Excelerate and Israel's state power utility could not be confirmed, however.

BP first won the contract to supply around 10 cargoes to IEC last year, some of which were diverted to Asia under a profit-sharing agreement, and Swiss-trader Vitol held the contract subsequently.

Outside the spot market, Taiwan's energy company CPC is said to have purchased 0.80 million tonnes/year (mtpa) of LNG from GDF Suez priced entirely against the benchmark U.S. Henry Hub.

CPC declined to comment when contacted earlier this morning.

Argentina's tender for additional LNG supplies next year is to close on Nov. 13 and an award is due to be made on Nov. 15, according to the tender document.

Details of the latest deals clinched between Russia's Novatek -operated Yamal LNG project and Chinese and Spanish buyers have begun to filter into the market.

Yamal last month sold 3 mtpa to Chinese buyer CNPC at an estimated slope of 12.2 percent plus a high fixed premium.

While last week, the Arctic project gave Spain's Gas Natural Fenosa dual-pricing for its 2.5 mtpa, linking supply to prices at the UK's NBP gas hub and Brent crude oil at a 12 percent slope, an industry source said.

Some traders said that the pricing estimate on the Spanish sale could be too high, given that the buyer would incur additional charges from transferring the LNG from the slower ice-capable vessels onto standard vessels.

It was also unclear if Gas Natural Fenosa would take delivery of the volumes in Spain, or whether it intends to perform ship-to-ship transfers off the coast of Norway.

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