Trading houses soak up UAE LNG cargoes as Japan contract ends

Author: Patrick Sykes

2019/07/17

• Netbacks make nearby India most attractive
• Trafigura, Vitol and Gunvor move in as 25-year TEPCO deal expires
• Unusual quality of gas limits list of buyers

LONDON (ICIS)--India has overtaken Japan to become the biggest buyer of Abu Dhabi’s LNG, as trading houses keen to maximise netbacks have filled the gap left by the expiry of ADNOC’s long-term contract with Japanese utility TEPCO earlier this year.

The Gulf emirate shipped 929,000 tonnes of LNG to India in the second quarter, up 15 time year on year, according to LNG Edge.

At the same time, exports to Japan slumped by around 90% to 121,000 tonnes, knocking Japan from the top spot for the first time on record.

Flows to Japan dropped suddenly as ADNOC’s 25-year contract to supply 4.3mtpa to TEPCO expired in March, just before six shorter-term sale and purchase agreements (SPAs) with trading houses Trafigura, Gunvor and Vitol kicked in from April.

Japanese traders including Mitsui and Mitsubishi remain active but with smaller volumes than before.

Most of the deliveries from the UAE to India were sold by trading houses on a spot basis, said a source at state-run Indian buyer GSPC.

CLOSE CALL

India’s proximity to the UAE means it is likely to remain an attractive destination for Emirati LNG as long as low global prices limit arbitrage to more distant markets.

A one-way journey from Das Island to Hazira in western India takes around five days and costs $0.14/MMBtu, compared with 17 days and $0.42/MMBtu to Futtsu in Japan, according to the LNG Edge shipping calculator.

The pool of potential buyers is further limited by the unusually high ethane content of the LNG produced from ADNOC’s Das Island plant, said the GSPC source.

The Emirates National Oil Company (ENOC), owned by the government of neighbouring Dubai, has also been active in supplying India, tendering for four cargoes to be delivered into Dahej from April-July.

ENOC officials were unavailable to comment. ADNOC did not respond to a request for comment.