Qatar LNG Spot Sales to Fall 40% by 2014, QNB Says

Qatar, the world’s biggest producer of liquefied natural gas, will reduce spot-market sales of the fuel by at least 40 percent by 2014, curbing supplies available for Europe, state-controlled Qatar National Bank said.

Spot volumes available for sale will drop to about 27 percent of total output this year from 28 percent, and to 16 percent by 2014 as long-term supply agreements go into effect and new ones are signed, the bank’s QNB Group said in a report.

“These new contracts are mainly to Asia Pacific and South America, meaning that Europe’s share of Qatar LNG exports is likely to fall,” according to today’s report.

A drop in Qatari LNG sales to Europe may boost dependence on Russian pipeline gas and push up prices on the continent nearer to Asian fees. Japanese LNG prices averaged $17 per million British thermal units this year, 16 percent higher than last year, the bank said. European prices rose 8 percent to $11.

“This provides a price incentive for spot-market deliveries to be exported to the Asia Pacific, in addition to the rising number of long-term” agreements, the bank said.

Asian demand for LNG, which is gas cooled to a liquid for transport by tanker, has grown as nations seek more fuel for power generation. Japan has increased purchases since shutting almost all its nuclear capacity following the Fukushima reactor disaster in 2011, while U.S. imports have dropped amid a boom in domestic shale-gas output.

Japanese Demand

Japan, the world’s biggest LNG buyer, will have to purchase at least 21 million metric tons on the spot market this year, according to data from Tri-Zen International Inc. The country paid an average of $16.84 per million Btus in September, down from $18.07 in July, which was the highest price since Bloomberg began compiling the data in 2006.

Qatar, which can produce 77 million tons of LNG a year, is diversifying its customer base, increasing its shipments of the fuel to 23 countries last year from eight in 2007, the bank said. The country is planning its first LNG delivery to Singapore and is reported to have signed a sales agreement with Thailand, the bank said. Jordan is also seeking to buy LNG from Qatar, which is helping it build a re-gasification terminal.

Qatar exported 47 percent of its supplies to Asia last year, with Japan purchasing 12 million tons, India 10 million and South Korea 8 million, according to the report.

Europe bought 42 percent of Qatari production, with the U.K. being the single largest buyer. Britain has a long-term agreement for an annual 12 million tons and purchased 4 million tons on the spot market, the bank said. Italy bought 6.1 million tons, Spain 4.8 million tons and France 3.2 million tons.

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