Koch backs Gazprom in latest Argentina LNG tender
US-based energy trader Koch Supply & Trading backed Russia’s Gazprom in the latest Argentina tender with its supply position in Nigeria.
Gazprom was awarded 10 cargoes for delivery to Argentina’s Bahia Blanca terminal in 2014 during the latest tender by the country’s state-owned gas buyer ENARSA.
Koch procured a string of cargoes from Nigeria earlier this year. The cargoes were sold by Italy’s Enel, ICIS understands, on an FOB (free on board) basis.
The first cargo was sold by Koch to Japanese trading house ITOCHU.
However, four of the cargoes from Nigerian position could be used by Koch to supply Argentina’s Bahia Blanca via Gazprom, according to a source. It is not clear as to how many cargoes will be used for the position.
Koch failed to pass pre-qualification for the tender and could not participate directly, ICIS understands. To qualify for Argentina tenders, sellers must demonstrate a history of at least 10 cargo discharges.
Some of the remaining cargoes for Argentine position will be sourced by Gazprom as reloads from Spain.
Some of the cargoes for supply of Bahia Blanca will be sourced as reload volumes from the Spanish terminals. The average price of the cargoes awarded is understood to be at $11.00-11.50/MMBtu premium to US Henry Hub gas benchmark.
The cost of FOB cargoes for Koch, on the other hand, is understood to be indexed to crude at around 13.5%. This could mean that some optimisation will need to take place in order for cargoes to work commercially in Argentina.
Some traders in the Atlantic basin questioned the economics of the agreement, as one source speculated that the Koch cargoes would make more sense being marketed into Asia.
However, Gazprom has a supply position at Russia’s Sakhalin 2 project that could cover any short sales that Koch has placed into northeast Asia on the basis of Nigerian string. Gazprom, in turn, could receive some of the Nigerian cargoes from Koch to cover position in Argentina. Such swap agreement could make swap economics work in terms of shipping.
A January delivery window remained unfulfilled following the award, according to two sources, as the scarcity of FOB volumes and peaking demand across the northeast Asian markets meant that sellers were seeking a price level which could have been deemed as too high by ENARSA.
In addition, Argentina’s inventory levels were understood to be high at present at its two floating terminals, Bahia Blanca and Escobar, because forecast demand was lower than expected.
As a result, fuel oil stocks have also risen, which has lowered refinery output. This has led the Argentine government to issue orders within the industrial and power sectors to step up consumption of both regasified LNG and fuel oil imports, as well as lessening the country’s pipeline imports of natural gas from Bolivia. Roman Kazmin
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