Portugal’s Galp shortlists five companies in LNG tender

Portugal’s incumbent energy company Galp has shortlisted five participants in a preliminary award of its recent LNG tender for four to six cargoes, ICIS understands.

While there is a shortlist in place, traders participating in the tender said on 31 July the winning bid for the cargoes equates to 10.5% of the Brent crude benchmark plus a $1.30/MMBtu fixed component.

The Brent-indexation level represents the cost of Galp’s long-term contract with Nigeria LNG (NLNG) for the delivery of volumes to Sines, Portugal.

The fixed component is to be split evenly in a profit-sharing agreement between Galp and NLNG, ICIS understands.

Galp is offering a string of four to six cargoes between October 2015 and September 2016, according to market sources. The company is attempting to divert its contractual volumes from NLNG to a higher-paying market.

Galp has also proposed four different options that effectively give bidders a choice to present FOB, DES or pipeline gas swaps.

The winning price level suggests that the cargo available for October 2015 could be lifted at around $7.20/MMBtu on an FOB basis in the context of current Brent prices.

Participants in the tender said sellers with existing supply positions with Egypt’s state-owned company EGAS could be the winners, given the huge interest.

“There is [also] growing demand in the Atlantic basin and India, so having a position in Nigeria gives traders an opportunity to optimise [their portfolio],” one source said.

Another participant said the unexpectedly high bid level indicates that someone has a short position over the timeframe indicated in Galp’s tender. Galp launched the tender on 22 July and closed it on 28 July. roman.kazmin@icis.com