UK’s top Qatari LNG importer seeks to broaden supply as cargoes slump

LNG Terminal

Britain’s busiest liquefied natural gas (LNG) import terminal, South Hook, is seeking to broaden its sources of supply as robust Asian demand diverts cargoes from Qatar – the world’s biggest exporter and the terminal’s majority shareholder.

Volumes to the terminal, in which Qatar Petroleum owns a controlling stake, have halved so far this year from a year ago to 1.2 million cubic meters (mcm) and amount to just 15 percent of 2016 volumes for the same period.

South Hook, in Wales, has been seeking to broaden the specification of its gas since January, a proposal that was approved late on Thursday by the Joint Office of Gas Transporters (JOGT), which administers the rules for transporting gas in Britain.

The terminal received approval to raise oxygen limits within the gas it delivers to Britain’s network, “allowing greater diversity of gas composition of future cargoes at South Hook LNG Terminal”, according to its proposal document to the JOGT.

“The UKCS (UK continental shelf) decline, Groningen production cuts and the closure of Rough long-range storage facility are all resulting in an increase in GB’s (Britain’s) gas import dependency,” it wrote, referring to falling regional supplies. “This modification supports this enhanced gas security of supply requirement.”

The Dutch government said in March it will phase out gas production at the Groningen field, once Europe’s largest, by 2030 as part of efforts to reduce the danger caused by small but damaging earthquakes.

The terminal, with ExxonMobil and Total as minor shareholders, has been importing LNG from Qatar since it was fully commissioned in 2010. With capacity of 15.6 million tonnes a year, it is one of the biggest in Europe.

South Hook declined to comment beyond its public documents on the issue, which did not specify from which other countries it planned to source its LNG.

However, analysts have noted the rapid expansion of U.S. LNG exports thanks to the launch of two liquefaction plants in the past two years, Sabine Pass in Louisiana and Cove Point in Maryland, to take advantage of domestic shale gas production.

Surprisingly strong demand in the past year from China, South Korea and India has up-ended past predictions from industry watchers that there would be a glut of supply due to rising output from the United States, Russia and Australia.

Broadly speaking, this meant Qatari LNG has been much in demand in Asia while Atlantic-based cargos have come to Europe. In Britain, South Hook’s quieter rival, Dragon LNG, has seen an uptick in its deliveries from a variety of sources.

The joint venture of Royal Dutch Shell and Malaysia’s Petronas received almost as much LNG so far this year as all of last year, including one of the first cargoes from Novatek’s Yamal LNG project in northern Russia and the maiden cargo from Dominion Energy’s Cove Point.

Dragon, which shares the Milford Haven port with South Hook, received four cargoes last year, all of them from Qatar, compared to six this year from Egypt, Trinidad, Russia and both U.S. terminals, according to Thomson Reuters Eikon data.

Source: Reuters



Comments are closed.