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Market comment: ENARSA secures six LNG cargoes

09 May 2012 11:06:04 | lmd

Argentina's incumbent LNG buyer ENARSA has secured six cargoes over the southern hemisphere winter season through a limited tender that resulted in the Argentine company paying an average DES (delivered, ex-ship) price of $17.00/MMBtu, a source in the country said.

The speed of the procurement plan comes as the peak winter heating season looms and the country remains uncertain about the reliability of receiving six contracted cargoes from Spain's Repsol over the next few months.

"We wanted to move quickly," the source said. "We had the option to go directly to the suppliers. It's like a mini tender."

Italy's Eni will provide three of the cargoes to Bahía Blanca that will be delivered in July and August. The volumes are likely to be reloaded from the company's position at the Zeebrugge terminal in Belgium, sources said.

Another two Bahía Blanca slots were filled by UK-based BP, which will deliver one lot in July and another in August, the source said.

The last of the six cargoes for ENARSA was closed with Petrobras, which sent the 126,000m³ LNG Capricorn to ENARSA's Escobar terminal over the weekend and has already discharged. This cargo was sourced at below $17.00/MMBtu, which ENARSA paid above for the Bahía Blanca cargoes, the source said.

"The market levels were up after having secured the majority of the supply for the winter at $13.00[/MMBtu]," the source in Argentina said. "We know that the market is not at those levels anymore."

The five cargoes for Bahía Blanca only covers ENARSA's needs that remained outstanding from the previous tenders, which left two slots open in May, one in July and another in August.

The source in Argentina said ENARSA has not received formal notice from Spain's Repsol regarding the delivery of six cargoes - two in each month from June to August - following Argentina's nationalisation of YPF.

ENARSA continues to discuss with sellers including US-based trader Excelerate Energy and US investment bank Morgan Stanley about future supplies, as some winter volumes could still be needed.

Yemen LNG outage may impact Asia

There was mounting speculation that the outage at Yemen LNG could have a significant impact on the northeast Asian market, as buyers CNOOC and KOGAS could be affected by the loss of cargoes through supplier Total, an offtaker at the facility.

"We hear Yemen will be closed for at least one month and that the cargo loss will be quite a lot," a Singapore-based trader said. During the last outage, Yemen LNG said the loss of production for about one month amounted to five LNG cargoes.

It is unclear if Total will need to secure additional cargoes to meet deliveries to the two buyers, or whether the supplier has declared force majeure, which will leave both KOGAS and CNOOC looking for alternative supplies.

GDF SUEZ was said to have declared force majeure to its customers in the northeast US on the basis that it had lost two cargoes from the facility.

After being granted a government subsidy to purchase spot volumes for Guangdong, CNOOC withdrew from the market in May as prices rose towards $18.00/MMBtu, according to numerous sources, who said such prices were too high for the state-owned company to absorb the cost into its government regulated pricing.

"These prices are just too high for the Chinese buyers, they will find it very difficult to factor these in," a seller said. "The Chinese have options and can draw on local gas supplies." However, several traders said the buyer will return to the market in June, with one saying that CNOOC will need at least one cargo for Guangdong over the peak summer season as inventories are low.

Elsewhere, South Korea's incumbent LNG buyer KOGAS was heard to be in the market for summer volumes, but this could not be confirmed.

Elsewhere, shipping data showed that Taiwan's incumbent buyer CPC is due to receive a cargo from Nigeria's Bonny facility this week.

The volumes are due to arrive on May 10 aboard the 140,000m³ LNG Oyo.

Montoir LNG conducts first reload

The first LNG reloading operation took place last week at the Montoir terminal in northern France, according to terminal operator Elengy, a GDF SUEZ subsidiary, as reported by ICIS.

The GDF SUEZ-chartered 149,700m³ Grace Cosmos lifted a reload cargo at the Montoir facility on 30 April, a source close to the operations said.

"The LNG was transferred from the onshore tanks within a two-day port call, in line with the schedule," Elengy said. The reload service at Montoir was launched on 1 February, but no reloading operation occurred until the end of April.

The loading rate at the Montoir terminal is of around 4,500m³/hour, which allows a reloading operation in less than two days for a standard cargo.

The reload cost is made up of a fixed price of €240,000 ($311,500) and a variable rate of €0.16/MWh, bringing the cost of a 1TWh - or 150,000m³ - reload cargo to €400,000, according to Elengy.

With the launch of the reload service, the Montoir terminal follows the Zeebrugge terminal in Belgium, which witnessed an increase of reloading operations following the Fukushima disaster in March 2011, as the significant premium of Asian prices to Europe offered advantageous arbitrage opportunities to the market.

"This service offers extra flexibility to shippers for seizing arbitrage opportunities," Elengy said.

The launch of the reload service did not have a particularly bullish effect on French prices, although some traders believe that it adds a risk premium to the near-curve contracts at the major French hub PEG Nord.

On 1 April, the southern French terminal of Fos Cavaou, in line with its Montoir counterpart, launched a reload service which has not been utilised yet.

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