UPDATE 2-Qatar diverts LNG to higher-paying China from U.S.
* 5 mln tonnes/year going to China instead of US
* China paying more money for the gas
* Qatar to reach 77 mln tonnes/year LNG capacity Sept 2010
(Adds background, details)
By Luke Pachymuthu
RAS LAFFAN, Qatar, Oct 27 (Reuters) - Qatar is diverting around 10 percent of its liquefied natural gas (LNG) exports to China from the United States, Qatar's oil minister said on Tuesday.
Energy-hungry China is paying more for the gas from the world's largest LNG exporter than the United States, Abdullah al-Attiyah told reporters at a press conference.
"We will not go to a low price market. There is a lot of demand for our gas elsewhere," said Ibrahim al-Ibrahim, adviser to the ruler of the Gulf Arab state.
U.S. gas prices have been pressured this year by increased domestic supply, low demand and record-high inventories, deterring shippers from sending large amounts of LNG to U.S. shores.
"We will go to the U.S. market if prices justify it, but I don't think we will dump any supplies there," Ibrahim al-Ibrahim told reporters after Qatar inaugurated a giant new LNG production facility.
Qatar has sold most of its gas on long-term supply contracts, but Qatari producer Rasgas signed short-term flexible deals earlier this year giving it the option to supply LNG to two U.S. terminals this year and next.
And Qatargas, the other LNG exporter from Qatar, will have the option to send gas to its Golden Pass terminal in Texas when it comes online in 2010.
However, these flexible deals will not result in many Qatari cargoes heading to the United States should prices stay low.
"We have a right to divert cargoes when we can sell the gas into a better market," Qatar's Oil Minister Abdullah al-Attiyah said at the same event.
Analysts do not expect Qatar to send many cargoes to the United States in the short term.
"I don't really see the Qataris hitting the U.S. with much LNG unless there's no other place for it to go," said Zach Allen, analyst for Pan Eurasian Enterprises in North Carolina. "China and India have both taken a lot of LNG this year."
China's energy demand is rising while U.S. demand falls. China imported a record volume of LNG in September, when it also posted its fastest oil demand growth in over three years. [ID:nPEK285530]
China received its first LNG cargo of about 216,000 tonnes from Qatar last week. The cargo was the first in a 25-year supply agreement between two state companies: the China National Offshore Oil Corporation (CNOOC) and Qatargas.
DIVERTED
Qatargas, one of two LNG producers in the tiny Gulf Arab state, has diverted 5 million tonnes per year (tpy) of LNG to China that was previously earmarked for the United States, Attiyah said.
Qatargas signed the deals last year to sell 3 million tpy to PetroChina Co Ltd (0857.HK)(601857.SS) and 2 million tpy to CNOOC, but it was unclear then the supplies had been diverted from the United States.
The volume is about 10 percent of Qatar's capacity of around 55 million tpy.
U.S. oil major Exxon Mobil (XOM.N) is the largest foreign investor in Qatar and has a stake in all of the projects coming on line this year to double Qatar's LNG production capacity to 62 million tpy.
Qatar has brought online three LNG production facilities this year - at 7.8 million tpy each they are the largest LNG plants in the world - boosting its capacity by over 24 million tpy from 31 million tpy last year. Another plant of equal size was due for completion before the year's end. [ID:nLQ508500]
Two more plants were due online next year, keeping Qatar on track to reach LNG capacity of 77 million tpy in September 2010, Attiyah said.
Tiny Qatar sits on the world's third-largest gas reserves. The source of its gas, the North Field, is the world's largest pure gas reserve. (Additional reporting by Edward McAllister in New York; Writing by Simon Webb; editing by Lisa Shumaker)
