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GDF Suez plans LNG cargo boost to Asia

GDF Suez expects to divert 10 times as many liquefied natural gas (LNG) cargoes to Asia next year than usual

Kwok W Wan, LONDON

The French energy firm plans to cash in on the huge price spread between the Atlantic and Pacific basin markets, North American chief executive officer Zin Smati said on Thursday.

GDF Suez operates the Everett and Neptune LNG-import terminals in New England, US, which have a combined import capacity of 3.8 million tonnes a year (t/y). But instead of delivering LNG to the US – where prices are depressed by the shale-gas boom – GDF Suez will divert tankers to Asia, which will secure prices four-times higher for the LNG.

Smati said Japan was buying gas for between $17 and $20/million British thermal units (Btu), compared with $4/million Btu in the US, and $9/million Btu in Europe. The price difference between Atlantic and Pacific markets has led traders to play the spread, although the arbitrage window could close by winter as European demand picks up.

But Smati remained upbeat: “Compared with last year, we had two cargoes we were able to move to other markets. This year, in the first six months, we were able to move 12. We bring in around 65-70 cargoes a year. We have real need for about 40-45 of those, so the potential is to be able to divert 20-25 cargoes. We’ve diverted 12, so there’s a possibility to divert more this year … and next year as well.”

Price jump

And the opportunity to take Atlantic basin LNG to Asia may yet remain, with potential for Japanese prices to soar, according to Bank of America Merrill Lynch. “If no approvals are granted following stress tests [of Japanese nuclear plants] and all reactors scheduled for maintenance shut down, LNG demand growth in 2012 could reach 8 million tonnes. Should this occur, spot LNG prices next year could rise to $25/million Btu,” it said this week. Such a jump in demand would equate to over 10% with Japan importing 70m tonnes of LNG in 2010.

For November LNG deliveries, Asian buyers were paying around $17/million Btu compared with around $12-13/million Btu paid by European buyers. With this huge incentive to send cargoes to Asia instead of Europe, UK winter gas prices – the most sensitive to LNG because of high imports – could rise because of increased demand resulting from colder-than-expected weather, or supply issues, such as gasfield outages.

“If we see a positive demand or negative supply shock, fourth-quarter UK gas prices will have to rise above the present level of $11/million Btu to compete with Japan and South Korea,” said Bank of America.

Global LNG supply has already tightened this year, with two-week rolling shutdowns of production trains at Qatargas in September and October. Qatar’s other producer, RasGas, is scheduled to shut train 7 for maintenance in January 2012. Qatar is the world’s largest LNG producer, with capacity of 77 million t/y, from 14 production trains.

GDF Suez holds long-term supply contracts with Trinidad and Tobago’s Atlantic LNG (2.2 million t/y) and Yemen LNG (2.7 million t/y). As well as its US facilities, the company also operates the 4.2 million t/y Montoir-de-Bretagne, 5.07 million t/y Fos-Tonkin, and 5.8 million t/y Fos-Cavaou terminals in France and owns a fleet of 17 LNG tankers.

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