LNG: Feb 5-9: Qatar cuts long-term contract price
In the DES Northeast Asia market last week, front month delivery, second-half March, hovered around $9.15-9.45 once. Under the ample supply weighing on prices, the coming Lunar New Year holiday in China made the market subdued, limiting the volatility in prices.
In response to the weak demand, Japanese utilities appeared to focus on taking long-term cargoes while avoiding spot procurements. In the wake of the fire accident at the 1,070MW No. 5 unit at the Taketoyo coal-fired power plant, JERA might have stopped reselling cargoes, according to a producer. JERA allegedly purchased a cargo April delivery last week. Weak demand for heaters was suggested by a utility company located in North Japan. In some parts of the area, such as Hokkaido, the road heating system is equipped with roads so that it can melt snow on the road. According to the company, gas demand for the system has been weak as well since snowfall was limited in this winter.
Even though the Lunar New Year holidays had been soon to come, some end-users in China as well as South Korea seemed to show buying interest. As reported, China National Oil and Offshore Corp (CNOOC) was seen to have bought two cargoes for April and May delivery at discount levels to DES Northeast Asia spot quotations but the company had apparently secured one or two cargoes for March delivery as well, according to a Japanese energy utility. For delivery to South Korea, end-users such as POSCO, a major steel manufacturer, and Prism Energy, a subsidiary of SK E&S, appeared to have some capacity to buy for March delivery. For these buyers, under the recent spot market, which hovered in the $9's, procuring March delivery in advance was allegedly on their radar in terms of preparation for the risk of a price surge during the Lunar New Year holiday caused by some shocks or others. An end-user in South Korea said, "It might be difficult to expect prices to fall under $9 in the DES Northeast Asia because of buying from South Korea and India."
--FOB Middle East, DES South Asia and the Middle East
State-run Qatar Energy inked a contract for 20 years with Indian state-run Petronet to procure 7.50 mil mt/year of LNG loading from the Northfield expansion project on a DES basis. Prices in the contract appeared to be a sum of 12.2% to Brent and 27cts. Compared with the existing ones--a sum of 12.67% to Brent and 52cts, on an FOB basis--expiring in 2028, the prices went down under the new contract. "The contract is classified as one of the largest volume categories in the past. Moreover, Qatar still has plenty of capacity to sell. So, they compromised to Petronet" (a Japanese company).
--FOB Atlantic, DES Europe and South America
Russian Novatek, the operator of the 19.80 mil mt/year Arctic2 project, appeared to focus on sales activity in China. The Russian company has allegedly organized a marketing team in Beijing recently. The project was added as a target by the US government on Nov 2 last year. As a result, selling cargo from the project to Japan and Europe has become difficult. "Novatek probably had no choice but to sell LNG to China as a last resort," said a Japanese company. In Latin America,the scheduled imports in the Dominican Republic in Feb were 160,000 mt, a 23.1% increase from a month earlier.