LNG volumes to France set to increase at start of summer

Author: Andrea Battaglia


LONDON (ICIS)--French LNG terminals are likely to see an increasingly high number of LNG deliveries amid higher US feedgas and tightening spreads between French PEG and Asian LNG prices.

The PEG April ‘21 contract traced up again in recent sessions after dropping below the ICIS East Asia Index (EAX) in the first days of week 11.

The front month rose above the Asian index on 10 March and reached a $0.10/MMBtu premium to the EAX on 12 March, but it then dropped below on 15 March, as losses in the carbon market pressured European prices.

As the EAX front-month spike proved to be short-lived and both the PEG May ’21 contract and the French spot LNG price started recovering from previous losses, the PEG discount to the Asian benchmark started closing again in the second part of the week.


ICIS analysts estimate that the cost of transporting LNG from Nigeria- one of the main LNG suppliers for France - to French terminals is about $0.26/MMBtu while it would be about $0.58/MMBtu to go to Japan. Therefore, even if the cost of gas in France is lower than in Japan, for Nigerian cargoes it would be still convenient go to France, given that the French discount to Japan remains lower than $0.32/MMBtu.

Similarly, according to LNG Edge arbitrage calculator, a cargo departing from Corpus Christi in the US, would need to cover a transportation cost higher than $1.00/MMBtu to reach either Japan, China or South Korea, but it would just need to cover a cost of $0.48/MMBtu to reach France. For Atlantic producers, Europe is probably a slightly more profitable choice.


The price of LNG in Asia for the front-month rose by $0.40/MMBtu at the beginning of week 11 from $6.25/MMBTu on 12 March, due to a combination of increased demand and supply issues. Increasing LNG demand from shippers in China, Japan and India helped support prices in Asia. Additionally, there were outages at the Sakhalin 2 LNG plant in Russia, according to the plant operator Sakhalin Energy.

“The operating mode of all gas infrastructure facilities of the Sakhalin 2 project - the Lunskaya-A (LUN-A) platform, onshore processing facility (OPF) and LNG plant - is currently being optimised in connection with unscheduled repairs and maintenance of the main equipment (one of two gas compressor units) at the OPF,” the company said to ICIS.

ICIS analysts, however, suggested the EAX spike was unlikely to be long-lived as seasonal factors come into play.


Henry Hub prices dropped in recent sessions and proved to be disconnected from Asia lately, with production facilities restarting after the freezing storm that hit the US in February,

“Looking at the Commodity Futures Trading Commission (CFTC) position posted on Friday, these saw a lot of money managers unloading part of their long positions, perhaps taking profit after the spike, or repositioning in view of the warmer season ahead,” a source active in the LNG market told ICIS.

The natural gas speculative net positions published weekly by the CFTC in the Commitments of Traders (COT) report provide a breakdown of traders’ open interest for futures and options. The last report published on Friday 12 March showed that net positions on natural gas were sent to zero.

The drop in Henry Hub prices could make LNG imports from the US to Europe even more affordable than before. Looking at France, in particular, a significant French PEG front-month premium to the US Henry Hub indicates that rising US deliveries to the country’s terminals are likely at the start of summer.


On Thursday, LNG Edge data signalled that up to 10 LNG laden vessels were expected to berth at French terminals between 19-28 March.

Of these, four have departed from the US, two from the Yamal LNG project in Russia, three from Bonny in Nigeria and one from Algeria.

These cargoes would be added to the 20 already arrived so far this month and could bring the total number of vessels expected in March to 30.

This seems to partially confirm indications provided by French terminal operators, which showed that up to 34 LNG vessel arrivals were expected in March. In the longer-term, up to 30 cargoes are awaited in April and 27 in May, according to port authorities.

In comparison, 25 cargoes arrived in March 2020, while 28 berthed last April, according to LNG Edge. In February, only 12 cargoes arrived at French terminals because of the EAX record spike seen in the first half of January.


As the market heads into spring, there has been a general shift of flexible LNG back towards northwest Europe and away from Asia, writes senior LNG analyst Alex Froley.

This includes the arrival in February of the first Qatari LNG to the UK since November, and the arrival in March of the first Qatari LNG to Belgium since October.

More Qatari LNG is on the way, as well as strong supply from Russia’s Yamal project and continued US flows to Europe. The US is seeing record feedgas into its production plants over 11 billion cubic feet/day, with Corpus Christi train 3 showing signs of starting to ramp-up towards higher rates as it heads towards commercial completion. France is seeing good arrivals from US, Russia, Nigeria and Algeria.