Related Articles
Forward article link
Share PDF with colleagues

Rasgas outage tightens LNG market

Prices firm on back of Darwin LNG problems and Japanese buying

LNG spot prices remained firm this week, with Qatari production maintenance and Japanese buying keeping the market tight.

Rasgas is planning a 35-day maintenance period on Train 3 from early May. The 4.7m tonnes a year (t/y) Qatari production facility supplies mainly India. Reports suggested Australia’s 3.7m t/y Darwin LNG plant had also shut because of a technical problem, but operator ConocoPhillips could not be immediately contacted for comment.

A tighter supply situation meant spot LNG prices to Asia for May and June delivery remained around $12-12.50/m British thermal units(Btu), according to traders, around the same as last week. Japanese utility Tohoku Electric also bought spot LNG cargoes for April and May for around $12/m Btu, market sources said.

Although spot LNG prices are expected to climb during the Asia’s summer peak demand season, European buyers were expecting to prices to fall in autumn.

“For September and October, it doesn’t look so bad.  We can still get spot cargoes and expect prices to be around $12/m Btu,” one European buyer said. He added that high LNG tanker charter rates would also keep prices down in the Atlantic basin, with cargoes less likely to be diverted for longer journeys to Asia.

Southern Europe was also unlikely to import more LNG during summer, because of cheaper pipeline gas supplies. “LNG can’t compete at the moment in Italy,” one market source said. Spain is also starting to receive more gas from Algeria through the Medgaz pipeline, meaning it was also importing less LNG.

Forward UK gas prices – a benchmark for LNG delivered to northwest Europe in the coming months – eased this week on lower crude prices. Gas for delivery in winter 2011/12 fell to around £0.72 a therm ($11.70/m Btu) , while summer 2012 prices traded at £0.65 a therm. Brent crude fell to nearly $120 a barrel after reaching highs of around £127/b after super-bull, Goldman Sachs, recommended to sell oil.

“Although potential contagion risk in the Middle East and North Africa remains elevated and has pushed oil prices above $125/b, at these price levels the risks are becoming more symmetric, which shifts the risk/reward of being long on oil,” the US investment bank said.

“Not only are there now nascent signs of oil demand destruction in the US, but also record speculative length in the oil market, elections in Nigeria and a potential ceasefire in Libya that has begun to offset some of the upside risk owing to contagion, leaving price risk more neutral at current levels.”

But the market was still looking at the supply situation from Nigeria and Yemen, with the threat of disruption from internal strife.

Nigeria held National Assembly elections over the weekend and is set to hold presidential and gubernatorial election are on 23 April.  But despite a relatively peaceful start, analysts have warned of potential attacks on LNG infrastructure.

“The potential for violence will be higher during the [Nigerian] presidential election. There were several bombings just before legislative elections and on voting day, including one at the election commission office in Suleja near the capital Abuja that left 10 dead,” investment bank Barclays Capital said.

Nigeria produces around 7% of global LNG, and exported nearly 16m t/y in 2009 according to Cedigaz.

And in Yemen, protesters have been battling troops loyal to President Ali Abdullah Saleh, calling for democratic and economic reforms. Over 100 people have died since clashes erupted on 11 February, which were inspired by popular uprisings in Tunisia and Egypt. Total has repeatedly said that the 6.7m t/y Yemen LNG plant – in which it holds a controlling 39.62% stake – is operating normally and that it is expected to hit its 2011 output target.  

Also in this section
Covid-19 to have lasting impact on gas
24 September 2020
The global gas and LNG market will continue to recover barring a second spike. But the pandemic’s impact will be measured in years
IMO alters competing fuels’ price dynamics
23 September 2020
Buyers of marine fuels may need to think harder about their decision-making when considering what to put in their vessels
Ambiguities dull lustre of carbon-neutral LNG
22 September 2020
The complexity and cost of pricing carbon emissions from LNG’s full lifecycle will likely deter adoption—so a narrower approach may work better