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Report: Mideast Buying Supports Weak Global LNG Market.

TEHRAN (FNA)- New regional buyers Egypt, Jordan, Kuwait and Pakistan are providing what little support there is in a weak global LNG market, weekly Middle East Oil & Gas News and Analysis (MEES) reported.

According to the weekly, global LNG demand and prices have been weak in the first nine months of 2015, with East Asian spot prices standing at around $7/mn BTU currently, down from around $12 /mn BTU a year ago. "The world's three largest importers - Japan, South Korea and China - are all set to take lower volumes this year, and this at a time when new production, from Australia in particular, is coming on-stream. For Q1-3 2015 the three countries' collective imports were down by 5%, or almost 2mn tons on a year earlier."

"The LNG market is becoming more challenging- we've been in a market for the last few years where East Asian LNG demand has grown faster than supply, and we're now at a stage where that relation-ship is switching. And for the next few years we expect LNG supply to grow faster than East Asian demand and that's causing the challenges," Steve Hill, marketing chief of gas-focused UK firm BG was quoted telling the firm's 30 October Q3 conference call.

"The impact of new output can clearly be seen in the Japanese data - not only are overall volumes down, but Qatar has been overtaken by Malaysia for top spot. Even for relatively short-haul India, where Qatar remains the dominant supplier, the country has seen its market share fall below 70% for the first time (see p10). With spot prices be -coming more competitive than oil-indexed long-term prices, India's largest buyer Petronet has been taking less contracted LNG from Qatar," the publication wrote.

"What market support there has been in recent months has come from an unexpected source - the Middle East. Egypt, which only started importing LNG in April, is in the process of commissioning a second FSRU with a third to follow next year. Cargoes are now set to arrive at a rate of four a month - a not insubstantial 3.1mn t/year on an annualized basis. This leaves Egypt neck-and-neck with Kuwait as the region's biggest importer. Kuwait took a record 2.7mn tons in 2014, up from 1.1mn tons for 2013."

Jordan, meanwhile, has been importing LNG since May, via an FSRU moored at Aqaba on the Red Sea. And, just outside the region, Pakistan began importing LNG from Qatar in March, with reports indicating a long-term supply deal may have been signed this week, MEES reported.

Though "market conditions are becoming more challenging," relief has come from "sales into the new markets," BG says, adding that sales this year to Egypt, Kuwait and Pakistan have "been as individual spot cargoes or part of small short term deals." Peter Evensen, CEO of the LNG arm of shipping firm Teekay reportedly told his firm's 5 November Q3 conference call that, though global LNG demand has been weak, "we've seen the Mideast take a lot of volumes that we hadn't expected. And that could really be significant. LNG imports have doubled into the Middle East with the startups in Egypt and Jordan, and in the Persian Gulf."

According to MEES, this Mideast buying has provided some support for LNG prices in recent Teekay months. Buying support has also come from India, but this "is a very price sensitive market," BG's Mr. Hill says. Here LNG has to compete with cheaper coal, while the country's LNG import capacity remains constrained by limited trans -mission capacity further downstream.

Despite high liquefaction and ship-ping costs, the weekly concluded, LNG is filling supply gaps in the Middle East as gas trade between regional countries has failed to take off despite significant resources in the region. "There is the question on whether the incentives are there to produce some of the non-associated gas resources in the Middle East," Tim Gould, from the IEA told MEES. "You still have low domestic gas prices, so once you start moving beyond gas that is free as a by-product of oil, then you need a different market strategy."

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Publication:FARS News Agency
Geographic Code:70MID
Date:Nov 17, 2015
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