Qatar diplomatic isolation neutral for LNG volumes in India

Moreover, in case LNG supplies from Qatar are affected, there is ample liquidity in the spot LNG markets globally and hence volumes disruption, if any, will be for a limited period.

Qatar exports its LNG largely through Strait of Homuz which passes though Iranian and Omani territorial waters and transit through the Strait is protected under a United Nations Convention. While LNG exports from Qatar could be threatened in the event that Iran and Oman restricts shipments from Qatar, the possibility of that is remote given Iran’s diplomatic stance.

The immediate fallout of the diplomatic isolation is limited to fuel costs of LNG vessels, as vessels heading to Qatar or arriving from Qatar are not able to halt at the port of Fujairah, which is a key bunkering port. This means that LNG vessels use LNG as fuel instead of LO/FSHS. Long-term LNG imports from Qatar into India are unlikely to be repriced significantly and will continue to track crude prices.

Globally, the LNG liquefaction capacity stood at 301.5 metric tpy as of January 2016. Over the next five years, the International Gas Union estimates that capacity will grow by 46%, primarily in North America and Australia. It is also interesting to note that nearly 890 million tpy of new liquefaction capacity is proposed, with 670 million tpy in US and Canada alone, on account of the shale gas supplies. Even if a significant part of this proposed capacity does not come on-stream the supply will remain significantly higher than demand. Moreover, in an oversupplied market, the key liquefaction players presently (Qatar and Australia) could price gas at operating costs. Additionally, renegotiation of long-term contracts in India in terms of pricing formula and destination flexibility, points to the leverage that buyers are enjoying in the LNG market.

Read the article online at: https://www.lngindustry.com/liquefaction/19062017/qatar-diplomatic-isolation-neutral-for-lng-volumes-in-india/