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LNG market on edge

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Reuters are reporting that the Middle Eastern rift between Qatar and Saudi Arabia has stoked concern over any supply disruptions to neighbouring countries spilling over into global gas markets.

Saudi Arabia, along with the United Arab Emirates and Egypt – both highly reliant on Qatari gas via pipeline and LNG – and Bahrain said they would sever all ties including transport links with Qatar.

As the rift lifted oil prices, LNG traders took a wait-and-see approach, alert to potential disruption of regional energy flows but erring on the assumption that any trade shocks could be contained given well supplied global markets.

Qatar's top clients in Japan and India quickly received reassurances that supplies would continue as usual.

Within hours of the diplomatic break, the UAE barred all vessels coming to or from Qatar using its popular anchorage point off Fujairah.

The ban impacts about six LNG vessels linked to Qatar now anchored in the Fujairah zone which may need to be moved out.

But there was little sign yet of LNG supply being hit.

Still, traders startled by the development began to plan for all eventualities, especially any upsets to piped gas supplies from Qatar to the UAE.

The UAE consumes 1.8 billion ft3 per day of Qatari gas via the Dolphin pipeline, and has LNG purchase agreements with its neighbour, leaving it doubly exposed to tit-for-tat measures.

So far flows through Dolphin are unaffected but traders say even a partial shutdown would ripple through global gas markets by forcing the UAE to seek replacement LNG supply just as its domestic demand peaks.

With LNG markets in bearish mood and demand weak, the UAE could cope with Qatar suspending its two to three monthly LNG deliveries by calling on international markets, but Dolphin piped flows are too large to fully replace.

Egypt, while relying heavily on Qatari LNG brought in by Swiss commodity trade houses, is less vulnerable than the UAE because it has no direct deals with Qatar, domestic gas output is squeezing out the need for imports, and traders would be liable for any moves by Qatar to restrict exports.

Qatar can block exports to certain countries by issuing so-called destination restrictions.

Egypt is halfway through its annual LNG cargo delivery programme for the year, with 50 shipments left to arrive, of which at least 10 are of Qatari origin.

Retaliatory measures such as suspending LNG supply deals would leave Qatar free to push more volumes into Europe where it has access to several import terminals.

Read the article online at: https://www.lngindustry.com/liquefaction/06062017/lng-market-on-edge/


 

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