EDF Trading and RasGas confirm new Zeebrugge supply deal
EDF Trading and Qatar’s RasGas confirmed on Tuesday their mid-term LNG supply agreement for interruptible deliveries of up to 3.4 million tonnes of LNG per year.
As first reported in HLM last Friday, the four and a half year deal caters for Qatar’s Ras Laffan Liquefied Natural Gas Company Limited (II) (RasGas) to supply EDF Trading Ltd, a 100% subsidiary of EDF Group, with LNG equivalent to about 4.5 billion cubic meters (Gm3) of natural gas per year.
EDF said the contract, which is a coup given the lack of available long-term LNG supply on world markets, marked the establishment of a long-term relationship between EDF and RasGas. However, the sales agreement is interruptible, meaning cargoes will be diverted to other markets as price signals dictate. In some respects, it is a put option for RasGas, though it is thought that minimum volumes are guaranteed to EDFT. In addition, while the primary delivery point for EDFT’s cargoes is Zeebrugge, the trader also has delivery flexibility.
RasGas also has a supply deal to provide 4.8 mtpa (6.5 Gm3/year) to Italian power generator Edison (50% controlled by EDF) at the delayed Rovigo offshore LNG terminal in Italy. The terminal is being built by Adriatic LNG, a joint venture between Qatar Petroleum (45%), ExxonMobil (45%) and Edison (10%). The delay means RasGas has spare cargoes available for the remainder of 2007 and 2008.
EDF said its LNG would be sourced from one of RasGas’s existing LNG production trains in Qatar and would be delivered ex-ship at the Zeebrugge LNG terminal in Belgium. RasGas added that the deal would facilitate the deliveries of Qatari LNG to markets in northwest Europe and was consistent with Qatar’s long term strategy for expanding and diversifying its natural gas market.
EDF has an ongoing feasibility study for a regasification terminal project in Dunkirk, and EDF Trading has eleven slots booked at France’s Montoir-de-Bretagne LNG terminal for 2007, comprising around 700,000 tonnes of LNG and equivalent to around 8% of annual French imports.
Last year announced it would cooperate with Japan’s Mitsui & Co. on securing LNG cargoes for the European market. The companies said they would consider an increase of the capacity and an extension of the agreement after 2008.
RasGas currently produces over 20 million tonnes per annum of LNG with five trains in operation. Production is expected to reach about 37 mtpa by the end of the decade, with the completion of seven operational trains.
For EDFT, the agreement brings it into the big time of LNG trading, as well as hugely enhancing its already significant position at Zeebrugge, and in the wider north European market. The deal may be seen in the context of the company’s recent decision to develop a big new storage facility at Etzel near Emden in north Germany, with a pipeline connecting it to the Benelux market.
The deal to some extent settles the question of whether the Qataris should plunge downstream into the European market. RasGas and associated companies wish to avoid exposure to local taxes, which gives them a strong incentive to keep their commercial arrangements offshore.
There was strong competition for the deal from European utilities “including all the usual suspects,” as one source described it. EGM understands RasGas chose EDFT because it was prepared to take the whole volume – a commitment too great for the traditional continental merchants, most of whom have long positions in pipeline gas.
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