Mideast LNG exports to Europe may drop for first time in 20 years

0
1352
Spread the love
Photo - Kipp Report

Rising local demand for power generation is forcing Qatar, Oman, Yemen and Abu Dhabi, suppliers of around 40% of the world’s LNG, to cut exports for the first time in 20 years.

According to the International Group of Liquefied Natural Gas Importers, or GIIGNL, a Paris-based lobby group, the Middle Eastern liquefied natural gas producers, biggest suppliers of the fuel to Europe, exported 96% of their capacity last year. Data compiled by Bloomberg suggests that will fall to about 94% in 2012.

According to the US Energy Information Administration, combined shipments from the region’s four producers of the chilled gas have risen every year since 1992.

Middle Eastern gas producers are facing a combination of reduced supply and rising demand and have embarked upon projects to build import terminals to meet their power needs. They are also beefing up their exports to more lucrative markets instead of Europe.

Japan, the biggest LNG buyer, is paying a record price to attract LNG. It shut down all 54 of its nuclear plants after the earthquake and tsunami in March last year that caused the Fukushima Dai-Ichi disaster.

“LNG now is going into Asia and tomorrow it could go into the Middle East,” Thierry Bros, a senior analyst at Societe Generale SA in Paris, told Bloomberg. “Those terminals coming on line will come at the expense of somebody else and that somebody else will be Europe.”

The International Group of Liquefied Natural Gas Importers (GIIGNL) said in its annual report published on 17 May that the four Middle East LNG producers exported 95.6 million metric tons last year. They have a combined liquefaction capacity of 100 million tons, it said.

Yemen LNG’s plant halted production for over seven weeks from 31 March after the pipeline feeding it was sabotaged, cutting 1 million tons of supply. According to Bloomberg estimates, the stoppages based on data provided by operators, partners, third parties involved in the work and people familiar with maintenance. One million tons of LNG is about 1.2 billion cubic meters of gas, equivalent to Sweden’s annual consumption.

Reports suggest Qatar and Oman will reduce their output by a combined 5 million tons in 2012. The gas-rich desert nation has increased its exports every year since 1996 and started its 14th liquefaction plant last year. Oman’s exports, on the other hand, fell 13% from 2007 to 2010 as gas was diverted for domestic use.

According to US Energy Department data, electricity demand in the Middle East grew 20% from 2006 to 2009, almost four times faster than the world average. The region’s gas use is estimated to rise to 428 billion cubic meters by 2015 and 470 billion cubic meters by 2020, from 335 billion cubic meters in 2008, International Energy Agency (IEA) data shows. Leslie Palti-Guzman, a New York-based analyst at the Eurasia Group, said the region’s rate of growth in imports is second only to China.

Many European analysts fear falling Mideast shipments would raise the prospect of price increases in a crisis-hit region that is also struggling to cope with a deepening sovereign debt crisis.

Greece is expected to vote in an anti-austerity party into power that opposes economic policies dictated by the EU and Germany. Spain is struggling to reform its ailing banking system amid recession and unemployment of more than 20%.

Barclays Plc has already lowered its forecast for benchmark British gas prices this year by 4%, citing “unexpectedly large reductions” in LNG shipments. The note added that Europe will lose 24 billion cubic meters of imports next year.

Kuwait started the Middle East’s first LNG import terminal in 2009, with Dubai following a year later. They both shipped in 3.7 million tons last year. Bahrain, the United Arab Emirates, Jordan, Kuwait, Israel and Lebanon have announced terminals as they seek to meet rising demand.

Saudi Arabia is exploring other energy options, including renewable energy, to cut its dependence on oil-export income.

Sabotage

Unrest in the region is also having an impact on supply. Attacks on a pipeline in Yemen have shut the country’s LNG plant three times in the past year. The nation, bordering Saudi Arabia and Oman at the southern tip of the Arabian Peninsula, is battling terrorists in the Abyan province.

Jordan and Israel have suffered disruption to gas supplies after a pipeline from Egypt came under repeated attacks. State-owned Israel Natural Gas Lines Ltd. signed a deal in October with Italy’s Micoperi Srl to build an offshore re-gasification terminal that may be completed this year.

Jordan intends to build an offshore terminal in the Red Sea port of Aqaba by June, the Al-Arab Al-Yawm newspaper reported in January, citing Energy and Mineral Resources Minister Qutaiba Abu Qura. Qatar is cooperating with Jordan to help ship fuel from the emirate, the Petra news agency reported, citing Jordanian Energy Minister Qutaiba Abu Qura.

Bahrain, which previously explored importing gas from Iran by pipeline, wants to award an LNG terminal contract by the end of this year and is in talks to source the fuel supply, Energy Minister Abdul-Hussein Ali Mirza said 7 May. The terminal is to be finished by 2014 or 2015, he added. Lebanon is seeking to import gas to counter an electricity shortage.

Facebook Comments