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Qatar suspends Egypt LNG supply talks

22 Aug 2013 16:20:21 | glm


Egypt has been forced back to the drawing board in its efforts to secure more LNG swap cargoes to alleviate domestic gas shortages, after supply talks with Qatargas broke down.

The Qatari supply consortia confirmed on Wednesday that it was no longer in talks with the Egyptian authorities on a string of cargoes beyond the five it already has committed to state oil company Egypt General Petroleum Company (EGPC).

A Qatargas spokesman declined to comment on how many cargoes were under discussion and the reasons for the suspension, although the Al-Borsa newspaper on Tuesday cited an Egyptian Ministry of Petroleum source as saying that the government had been negotiating to pay Qatar approximately $13/MMBtu for each of the 13 cargoes that would have been delivered to Egyptian LNG (ELNG) offtakers BG Group and GDF SUEZ over a nine-month period.

With the Qatari talks now at an end and Egypt's interim government facing a worsening balance-of-payments crisis - and the suspension of talks on a $4.8bn loan from the International Monetary Fund - the administration has turned to other Arab states for loans, grants and short-term energy deals to avert any further civil unrest.

Kuwait, Saudi Arabia and the United Arab Emirates have pledged to commit up to $12bn in fuel shipments and other loans to the interim administration, and the ministry official was cited by the newspaper as saying the ministry was not turning its attention to potential supply from the UAE's Abu Dhabi Gas Liquefaction (ADGAS) consortium.

ADGAS was not available to comment on whether it had opened talks. The three-train ADGAS plant has a nominal capacity of 5.3mtpa and has a long-term contract to supply Tokyo Electric Power (TEPCO) with 4.3mtpa. It also signed a mid-term agreement for approximately 1mtpa with the Japanese utility after the March 2011 earthquake and tsunami, although this is understood to expire next year.

While the state of Qatar has donated five cargoes to Egypt this summer - which are being used as backfill for state-owned Egyptian Natural Gas' (EGAS) contractual obligations to BG Group and GDF SUEZ - the Egyptian government said in late April that Qatar had agreed in principle to a wider LNG swap agreement under which it could make 18-24 cargoes available over a one-year period.

Egypt has found it difficult to come to terms with disappointing domestic natural gas production, combined with surging domestic natural gas demand.

The country has stopped LNG exports from the SEGAS plant at Damietta since last December, and has reduced flows to ELNG over its peak summer season as it seeks to provide sufficient gas for domestic power generation.

The five-cargo Qatargas tranche, which spans from late July to mid-September, came about through an inter-governmental agreement signed when ex-President Muhammad Morsi was still in power.

The first of the five donated cargoes arrived at France's Fos terminal earlier this month, while the second is said to be en-route to its destination after loading at Ras Laffan on 9 August. Four LNG carriers loaded at Ras Laffan on 9 August, according to ship tracking data, including the Q-Flex Al Bahiya, which is en route to east Asia.

While these first two swap cargoes were arranged in DES (delivered ex-ship) transactions - using Qatari LNG carriers - the third swap cargo could be delivered through an FOB (free on board) arrangement.

The unladen BG Group-controlled 145,000 cubic metre Methane Nile Eagle is currently located just outside Ras Laffan, according to ship data on 22 August.

The Qatargas spokesman said that it was hopeful of completing the two additional loadings in the "near future", with the fifth and final loading scheduled for September. Overall, two of the cargoes have been allocated to BG Group and three cargoes to GDF SUEZ.

The five-cargo Qatargas tranche is understood to come from the Qatargas-2 venture.

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