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EGL targets Greek and Turkish LNG markets

Greek and Turkish gas consumption is growing and will need liquefied natural gas (LNG) imports to satisfy demand, Markus Brokhof, the head of gas supply at European energy trader EGL, told Petroleum Economist

After delivering its first LNG cargo to Greece in early August, EGL said it was aiming at bringing another three to four shipments this year. It wants to maintain a quarterly delivery to Greece and is looking for a Middle East or African long-term LNG supply agreement rather than relying on the spot market.

“The first cargo was done in a so call opportunistic phase, but now we are going in more of a sustainable phase which means we are intending on entering into long term offtake agreements,” Brokhof told Petroleum Economist in an interview.

Brokhof estimated Greek gas demand could double by 2020 to nearly 8 billion cubic metres (cm) and the country would need LNG to diversify supply from Russia. He said Greece currently imports 3 billion cm from Russia and 750 million cm from Azerbaijan via pipeline. Greece’s Revithoussa LNG terminal can import 1.6 million tonnes a year (t/y), according the PE LNG data centre.

Market liberalisation

EGL was only allowed to deliver LNG to Greece after the country started liberalising its gas market last year. ELG reckon LNG imports could compete with Gazprom supply, which is sold on long-term oil-linked contracts. ELG plans to import the LNG and sell the gas to Greek market, targeting wholesaler, power plants and distribution customers in Greece.

“EGL is a pan-European trader on the power side, but there is a lot of risk involved in LNG. You need to have the value chain together, you have to have slots on the regasification side or else you pay penalties. All this has to fit together, so it was important for us to understand the business and the regulations,” Brokhof said.

EGL is also looking at importing LNG into Turkey, after signing a memorandum of understanding (MOU) earlier this year with Turkish state-owned energy firm Botas. The MOU included other possible co-operation on gas transportation on the Trans Adriatic Pipeline project, which plans on piping gas from the Caspian region to Italy.

Turkey itself is also a growing gas market, with consumption doubling in eight years to 39 billion cm in 2010, according to Cedigaz data. And energy demand is expected to grow in line with its economy, which expanded 8.2% in 2010 and 11% in the first quarter of 2011.

Tanker market to stay tight

Turkey’s Marmara LNG import terminal has 4.20 million t/y capacity while Izmir has 4.38 million t/y. The country imported 5.7 million t/y in 2010, Cedigaz data showed.

EGL also saw continuing tightness in the LNG tanker market as well as lack of available spot cargoes.

“After Fukushima, a lot of people have booked LNG ships and are looking at the opportunities in Japan,” Brokhof said. LNG tanker charter rates have doubled to $100,000/day in the past 12 months, meaning even if an LNG cargo was available, traders many not be able to get a tanker to pick it up.

Spot LNG prices have also risen, and may even reach $20/million British thermal units (Btu) this winter, Brokhof said. “I believe that could well happen. If Japan’s heavy industry recovers quickly, then yes prices will jump.” LNG spot prices were around $10/million Btu before the Japanese earthquake in March disabled a number of nuclear reactors.

Petroleum Economist forecasts Japanese LNG imports to hit record highs August, as the country offsets its lost nuclear power capacity with gas-fired power plants. Meanwhile, trading firm Gunvor is already playing the LNG price spread between the Atlantic and Pacific basins, providing competition for tankers and cargoes. EGL is one of a number of traders entering the LNG market. It also signed a regasification agreement with the UK’s South Hook terminal this year, while global energy trader Trafigura also signed a similar agreement last week.

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