* Qatargas vessels transit Suez for Ras Laffan.
* Egypt gets Qatar LNG despite blockade.
* Limited impact of UAE’s port restrictions.
* Qatar Petroleum: “business as usual”.
Concerns over the impact of diplomatic blockade on Qatar on LNG trade flows eased this week, following deliveries of Qatari LNG into Egypt and the transiting of several Qatari vessels through the Suez Canal, a key transport route for Middle East LNG shipments to the European markets.
This came as a relief to LNG traders, who were caught off guard last week when two Qatari cargoes destined for the UK via the Suez Canal turned around off the coast of Yemen and diverted towards South Africa’s Cape of Good Hope, raising fears Egypt might have restricted access to the waterway.
Market experts, however, argued the diversion was likely a move by the Qatari government to avoid transiting the Suez Canal and paying US dollar-denominated canal fees to Egypt, among those to have cut diplomatic ties with Qatar.
“It was likely Qatar’s decision to turn away the two cargoes rather than Egypt’s,” said an Atlantic-based LNG trader.
An Asia-Pacific-based LNG shipping analyst said: “As an international waterway, it is very hard to prohibit the transit of vessels, and the Egyptian government would not oppose the transit of Qatari vessels as the canal is a big contributor to the national income.”
“Instead the Qatari government may choose not the transit to avoid paying any US dollars to the Egyptians,” the analyst said.
LNG trade disruption concerns emerged amid rising diplomatic tensions in the Middle East, following a decision by Saudi Arabia, Bahrain, Egypt and the UAE on June 5 to cut diplomatic ties with Qatar, the world’s largest LNG supplier, over claims it funds terrorism and extremism.
Qatar exported 78.8 million mt of LNG in 2016, more than 30% of a total global supply of 257.8 million mt, according to Platts Analytics, and an increasing share of its production is being delivered to emerging Middle Eastern buyers, including Egypt, Jordan and the UAE.
The 162,000 cu m LNG carrier Golar Glacier and the 160,000 cu m Golar Celsius have delivered cargoes from Ras Laffan to Egypt’s Ain Sukhna terminal in the Gulf of Suez since June 10, the first such shipments since the start of the diplomatic fallout.
Another vessel loaded with Qatari LNG — the Galicia Spirit — was entering the Red Sea Tuesday, according to S&P Global Platts trade flow software cFlow, although the destination of the cargo was yet to be confirmed.
Qatari LNG supply is crucial to Egypt’s energy security, with more than 60% of the country’s LNG imports in 2016 — 4.61 million mt of a total 7.26 million mt — sourced from Qatar and delivered as part of supply contracts between state-owned Egyptian Natural Gas Holding, or EGAS, and traders or portfolio sellers.
Elsewhere in Egypt, three vessels on long-term charter to Qatar’s state-owned LNG exporters Monday entered the Suez Canal through Port Said in the Mediterranean heading for Ras Laffan, easing concerns that Egypt may have prevented previous Qatari vessels from transiting the key waterway.
The 152,000 cu m Al Marrouna, 210,000 cu m Al Bahiya and 216,000 cu m Al Gharrafa entered the canal unladen, after delivering Qatari LNG cargoes to Rovigo, Rotterdam and Milford Haven, with another two vessels expected to cross the canal in the next couple of days.
Supply concerns were raised among European LNG buyers last week when two laden UK-bound Q-Max vessels were diverted away from the canal, prompting gas hub prices in Europe to rise sharply.
The 266,000 cu m Zarga LNG and the 267,000 cu m Al Mafyar had been heading to Milford Haven and South Hook, respectively, via the Suez Canal, before they were diverted off the coast of Yemen and towards South Africa’s Cape of Good Hope, a much longer route to the European markets.
“It was a political decision,” the shipping analyst said. “The Qataris have enough shipping capacity of Q-flex and Q-Max so they can afford an extra week of shipping time to the UK.”
The shipping route around South Africa makes sense for loaded vessels heading from Qatar to the Atlantic, but not for those in the Mediterranean, as turning back to Gibraltar and around Africa would make the voyage commercially unworkable, he said.
With Asia Pacific day rates at around $31,000, the shipping cost of a one-way trip from Qatar to Europe around the Cape of Good Hope would be 10 cents/MMBtu higher than thorough the canal, where one-way fees are estimated at $450,000 for laden Q-Max vessels and $350,000 for unladen ones, above the return transit cost of $600,000 for regular size vessels, the analyst said.
DUBAI AND BUNKERING
Restrictions by the UAE, another importer of Qatari LNG, on tankers going to or arriving from Qatari ports remained in place, according to a UAE government notification released Monday.
But the effect on LNG is limited to Qatari LNG imports into the UAE’s only LNG terminal, the 1 Bcf/d FSRU at Jebel Ali in Dubai, and bunkering activity at the UAE’s major Fujairah bunkering port — 37 LNG vessels called in Fujairah on their way to Qatar in May alone, cFlow showed.
The UAE has not received Qatari LNG since the diplomatic blockade, but the country’s diversified supply portfolio means its impact will be limited — only 30% of Dubai’s imports in 2017 to date have been sourced from Qatar, with the rest coming from Africa, Europe and the Americas.
The effect on bunkering activities is also limited, given there are several alternative bunkering ports along both the Atlantic and the Pacific routes, and the fact that LNG ships have the option of using boil-off gas as bunkering fuel.
“Singapore is the first alternative for the eastern customers,” with Japan, South Korea and Taiwan also having bunkering capacity, the shipping analyst said. “For western customers, South Africa, Gibraltar and Rotterdam are the best options,” the analyst said.
RAS LAFFAN EXPORTS
In an unusual step to reassure customers and markets, Qatar Petroleum, owner of Qatargas and Rasgas, said Saturday its operations had so far not been affected by the recent diplomatic crisis.
“Qatar Petroleum, and its subsidiaries, wishes to affirm that it is conducting business as usual throughout all its upstream, midstream and downstream businesses and operations,” the company said in a statement.
QP President and CEO Saad al-Kaabi underlined Qatar Petroleum’s “determined efforts to continue uninterrupted supplies as the world’s most reliable LNG supplier.”
The exporter’s creditworthiness was reaffirmed last week, with S&P Global Ratings saying its ‘A’ ratings and stable outlooks on the $4.415 billion senior secured bonds issued by Qatar-based Ras Laffan Liquefied Natural Gas were unaffected by the economic and diplomatic sanctions against Qatar.
“We do not anticipate that exports of LNG from Qatar to major markets in Asia and Europe will be affected by the sanctions at this point, given that Qatar can access international waters via the Strait of Hormuz without crossing Saudi, Emirati or Bahraini national waters.”
(Source: S&P Global Platts)