A severe drought in the Panama Canal and attacks on merchant vessels by Yemen's Houthi rebels in the Red Sea have raised the prospect of cargo swap agreements, whereby a US cargo goes to Europe in place of a contracted Qatari cargo, and a Qatari cargo is instead shipped to an Asia-based US customer.
Qatar Energy has traditionally avoided such deals, preferring to deliver its own tankers. But given the current circumstances in the Red Sea, agreeing a cargo swap could become a possibility, said Jacopo Casadei, a gas analyst at Energy Aspects.
However, he pointed out that there was no evidence of any recent cargo swaps having been made.
Qatar this month began shipping LNG via South Africa’s Cape of Good Hope – which can add up to a fortnight to the voyage time from Qatar to Europe – to avoid the Red Sea.
Qatar was provisionally seen to have exported just 0.25m tonnes via the Suez Canal this month, compared with a usual monthly average of well over 1m tonnes, Kpler estimates showed.
“The total number of cargos produced by Qatar hasn't changed, it's basically just more of a logistical challenge in getting that supply into the market,” Casadei said.
“A lot of sense”
Robert Brooks, founder and consultant at US-based analysis firm RBAC, said swap deals would make “a lot of sense”, even without the Red Sea troubles.
“Of course, the parties involved need to make sure the swaps consider differences in the composition and volumes of LNG to be swapped and perhaps other terms, but this would be a matter of course,” he said.
“But if the Qatari cargo were delivered to an Asian customer of a US LNG facility in exchange for a cargo delivered from the US to the Qatari customer in northwest Europe, chances are extremely good that the total distance and therefore total transportation cost would be lower,” Brooks said.
Such cost savings could be passed on to the customers as an incentive to do the deal, he noted.
Gary Cunningham, market research director for US risk-management firm Tradition Energy, said cargo swaps would work well, particularly given the “struggles” shipping US Gulf Coast origin cargoes through the Panama Canal.
“Many Asian buyers have offtake positions with US LNG terminals in the Gulf of Mexico, but because of the drought in Panama, shippers are forced to go all the way around either South America or Africa to deliver,” he said.
This added days or weeks to shipping times, as well as additional costs, he said.
“If instead the US cargoes sailed east across the Atlantic, they could meet the delivery requirements to Europe faster and cheaper,” he said, noting the Asian owner of the cargo – by replacing the shipment with a Qatari cargo – could also meet delivery schedules “quite easily.”
“The true fungibility of LNG is at play here,” he added.