(In paragraph 11 makes clear Cairo not paying for five cargoes)
By Oleg Vukmanovic
LONDON, July 12 Qatar's gift of five natural gas
cargoes to fuel-short Egypt will likely be signed over to the
foreign partners in Egyptian export plants, GDF Suez
and BG Group, as compensation for declining exports.
Doha agreed last month to donate five LNG tankers to help
Cairo cover obligations to foreign firms.
It is gas which Egyptian port facilities are not equipped to
import, but the cargoes will allow Egypt to devote more of its
own supply to its domestic market, where energy shortages helped
fuel civil unrest.
According to talks held last week, GDF Suez will take
delivery of three liquefied natural gas (LNG) cargoes in Europe
while BG Group will send two shipments to Asia, a source at one
of the companies said.
But the allocation of cargoes has not yet been finalised.
"The decision-making process is taking longer than expected
due to the situation in Egypt," the source said, referring to
last week's military-backed overthrow of Mohamed Mursi.
"There is a also question mark over whether leadership
changes in Qatar could delay or suspend the deal," he said of
the recent father-to-son power transfer in the tiny Gulf state.
LNG producer Egypt has curbed exports in recent years due to
supply shortages and growing domestic needs, which in turn have
disrupted deliveries to foreign firms who funded its export
plants. Egypt can export LNG but it cannot import it without a
floating terminal, which it has struggled to secure after
cancelling a number of tenders.
As part of a bigger deal, Qatar pledged in May to supply
18-24 cargoes to firms such as BG Group and GDF Suez over the
next year or more. But the number of cargoes under discussion
has since shrunk to 13, said to a source at state-run oil
company EGPC in Cairo.
That deal has been held up due to disputes over price.
While Cairo will not have to pay for the five cargoes, Qatar
will still have to compensate the foreign partners in Qatargas
II, the plant earmarked to supply the gas, for the value of the
Qatar cannot easily take unilateral decisions on where to
send its LNG or to offer discounted rates because it is bound by
strict commercial arrangements with its project partners.
The foreign partners in Qatargas II, Total and
ExxonMobil, have agreed to be paid $13/mmBtu for the
volumes - a price that could also be used to set the value of
the other 13 cargoes, according to a confidential report by
consultancy Poten and Partners, obtained by Reuters.
The five "gift" cargoes would act as the discount, one
source familiar with the matter said, as Qatar is bound by
commercial constraints and fears that cut-price supplies could
jeopardise some of its long-term deals.
Although cash-strapped Egypt is reluctant to pay high
prices, $13/mmBtu is understood to be the best deal Qatar can
offer on a purely commercial basis, trade sources said.
It is the price of LNG sold in Asia, Qatar's main export
market, minus the cost of shipping.
This swap would help free up more gas for the domestic
market but it is not clear whether Egypt could redistribute gas
normally destined for exports owing to pipeline constraints. The
domestic grid would need to be opened up, a process that would
take 3-4 months, one of the sources said.
GDF Suez and BG Group, who own stakes in Egypt's Idku export
plant, declined to comment.
(Additional reporting by Julia Payne in London and Maha El
Dahan in Abu Dhabi; Editing by David Evans)