Mideast to Cut LNG Exports to Europe for First Time

Source: Bloomberg 6/1/2012, Location: Middle East

Middle East liquefied natural gas producers, the biggest suppliers of the fuel to Europe, are set to cut exports for the first time in 20 years amid rising local demand for power generation. Qatar, Oman, Yemen and Abu Dhabi, which supply 40 percent of the world’s LNG, exported at 96 percent of capacity last year, according to the International Group of Liquefied Natural Gas Importers, or GIIGNL, a Paris-based lobby group. That will fall to about 94 percent in 2012, according to data compiled by Bloomberg. Combined shipments from the region’s four producers of the chilled gas have risen every year since 1992, according to the U.S. Energy Information Administration.

The combination of reduced supply and rising demand in the Middle East, as countries build import terminals to meet their power needs, may accelerate the diversion of supplies from Europe to more lucrative markets. Japan, the biggest LNG buyer, is paying a record price to attract LNG after shutting all 54 of its nuclear plants following the earthquake and tsunami in March last year that caused the Fukushima Dai-Ichi disaster.

“LNG now is going into Asia and tomorrow it could go into the Middle East,” Thierry Bros, a senior analyst at Societe Generale SA in Paris, said in a telephone interview. “Those terminals coming on line will come at the expense of somebody else and that somebody else will be Europe.”

The four Middle East LNG producers exported 95.6 million metric tons last year, the GIIGNL said in its annual report published May 17. They have a combined liquefaction capacity of 100 million tons, it said.

Yemen LNG’s plant halted for over seven weeks from March 31 after the pipeline feeding it was sabotaged, cutting 1 million tons of supply, according to Bloomberg estimates of stoppages based on data provided by operators, partners, third parties involved in the work and people familiar with maintenance. One million tons of LNG is about 1.2 billion cubic meters of gas, equivalent to Sweden’s annual consumption.

Qatar and Oman will reduce output by a combined 5 million tons in 2012, the estimates show. Qatar has increased exports every year since 1996 and started its 14th liquefaction plant last year. It plans no more. Oman’s exports fell 13 percent from 2007 to 2010 as gas was diverted for domestic use.

Middle East electricity demand grew 20 percent from 2006 to 2009, almost four times faster than the world average, according to U.S. Energy Department data. The region’s gas use may rise to 428 billion cubic meters by 2015 and 470 billion cubic meters by 2020, from 335 billion cubic meters in 2008, International Energy Agency data show. The Mideast’s rate of growth in imports is second only to China, Leslie Palti-Guzman, a New York-based analyst at the Eurasia Group, said in a May 16 email.

Demand from the Middle East and Asia will ensure LNG spot cargoes, for near-term supply, sell at a price equal to oil-indexed contracts, which is about $16 to $18 per million British thermal units currently, Bros said in the May 9 interview.

Spot LNG for delivery to northeast Asia in four to eight weeks rose 15 cents over the past week to a three-year high of $18.40 a million Btu, New York-based World Gas Intelligence reported Wednesday. Front-month U.K. gas closed at 53.98 pence a therm on the ICE Futures Europe exchange Thursday. That’s about $8.32 a million Btu.

Falling Mideast shipments raise the prospect of price increases in Europe at a time when the region is struggling with a deepening sovereign debt crisis. Greece failed to form a government after parties opposed to EU austerity plans gained ground in May 6 elections. Spain is struggling to clean up its banks amid recession and unemployment of more than 20 percent.

Barclays Plc raised its forecast for benchmark U.K. gas prices this year by 4 percent this month, citing “unexpectedly large reductions” in LNG shipments. Europe will lose 24 billion cubic meters of imports next year, it said.

Kuwait started the Middle East’s first LNG import terminal in 2009, with Dubai following a year later. They shipped in 3.7 million tons last year, according to GIIGNL. Bahrain, the United Arab Emirates, Jordan, Kuwait, Israel and Lebanon have announced terminals as they seek to meet rising demand.

Saudi Arabia is exploring for gas to use in power plants to cut its dependence on oil-export income.

While exports from the region’s current producers decline, Israel and Iraq are on course to meet the shortfall. Israel may ship as much as 10 million tons a year of LNG by 2020, according to Palti-Guzman, after Noble Energy Inc. develops the Leviathan and Tamar fields that hold about 30 trillion cubic feet of gas. Iraq may export 4.5 million tons a year from the south of the country by the end of this decade as well as by pipeline through Turkey, she said.

Unrest in the region also limits supply. Attacks on a pipeline in Yemen have shut the country’s LNG plant three times in the past year. The nation, bordering Saudi Arabia and Oman at the southern tip of the Arabian Peninsula, is battling Al-Qaeda-affiliated militants in the province of Abyan.

Jordan and Israel have suffered disruption to gas supplies after repeated sabotage on a pipeline from Egypt. State-owned Israel Natural Gas Lines Ltd. signed a deal with Italy’s Micoperi Srl to build an offshore re-gasification terminal that may be completed this year, the firm said in October.

Jordan plans to offer a tender to build an offshore terminal in the Red Sea port of Aqaba by June, the Al-Arab Al-Yawm newspaper said in January, citing Energy and Mineral Resources Minister Qutaiba Abu Qura. Qatar and Jordan set up a technical committee that will study shipping fuel from the emirate, the Petra news agency reported, citing Jordanian Energy Minister Qutaiba Abu Qura.

Bahrain, which previously explored importing gas from Iran by pipeline, wants to award an LNG terminal contract by the end of this year and is in talks to source the fuel supply, Energy Minister Abdul-Hussein Ali Mirza said May 7. The terminal is to be finished by 2014 or 2015, he added. Lebanon is seeking to import gas to counter an electricity shortage.

Canada >>  7/29/2022 - Pacific Energy Corporation Limited (Pacific Energy) and Enbridge Inc. (Enbridge or the Company) announced an agreement to jointly invest in the constr...
Italy >>  7/25/2022 - - The aim is to leverage on infrastructure and know-how of both companies, thereby contributing to decarbonisation of transport and off-grid users

United States >>  7/23/2022 - ION Commodities, the global leader in Energy and Commodity management solutions, is delighted that Golden Pass LNG, owned by affiliates of QatarEnergy...
Japan >>  7/15/2022 - INPEX CORPORATION (INPEX) and Sakata Natural Gas Co., Ltd. (Sakata Natural Gas) jointly announced they entered into an agreement on the carbon neutral...

United States >>  7/14/2022 - ConocoPhillips announced a potentially significant expansion of its global liquefied natural gas (LNG) business through investment in a new large-scal...
United States >>  7/11/2022 - Marathon Petroleum Corp’s Trans-Foreland Pipeline Co unit wants more time to convert the Kenai liquefied natural gas (LNG) export plant in Alaska into...

Related Categories: Deodorization system  Gas dehydration  Gas sweetening  Gas Treating  General  GTL Processing  LNG Processing  LPG Domestic use  LPG Odorless  Packing  Phase Separation  Scrubbers 

Related Articles: Gas dehydration  Gas sweetening  Gas Treating  General  GTL Processing  LNG Processing  LPG Domestic use  LPG Odorless  Packing  Phase Separation  Scrubbers 

Gulf Oil and Gas
Copyright © 2021 Universal Solutions All rights reserved. - Terms of Service - Privacy Policy.