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Qatar favours Asia for spot LNG deliveries – analysts

(Montel) Qatari spot LNG cargoes are increasingly finding a home in Asia as threats to shipping in the Red Sea mean European destinations require lengthier voyages around South Africa, according to analysts and ship tracking data.

The last vessel owned by Qatar Energy – formerly Qatargas – earmarked for Europe, the Al Shamal, left the country on 29 January and is now passing the southern tip of Mozambique.

However, all the company’s vessels since then have been sent to Asia, Kpler ship tracking data showed.

The diversions come following attacks by Iran-backed Houthi rebels on international shipping in the Red Sea since November, with US-led retaliatory strikes on key Houthi targets intensifying tensions in the region.

Rounding the coast of southern Africa to avoid the Red Sea takes an additional 10 days to get to Europe, and there are at least 10 Qatar Energy cargoes making such a voyage since mid January. They are due to arrive in Europe in the next two weeks.

Instead, Qatar Energy is now reportedly offering spot LNG cargoes delivered free-on-board (FOB) to better entice Asian buyers, according to Kpler senior analyst Laura Page.

“What we are hearing is that they have been selling FOB, indicating that they could be selling more spot LNG into Asian markets,” said Page.

A Switzerland-based trader confirmed the FOB offers but was unable to specify the number of vessels involved. "It could be multiple,” he added.

Another China-based trader said at least one cargo has been offered FOB by Qatar Energy and awarded at a high USD 8/MMbtu level.

Qatar's LNG exports increased to 7.6m tonnes in January from 7.1m tonnes in December, with 5% more going to Asia in January than in the prior month, Kpler data showed.

Europe and Turkey have imported 10 Qatari cargoes since the beginning of the year, loaded with almost 0.8m tonnes.

Tighter market
A drop in Qatar LNG exports to Europe could result in tighter supply and raise prices, said a Spain-based LNG trader.

Europe has relied on LNG from key suppliers Qatar and the US amid efforts to shun gas from Russia following the country's invasion of Ukraine in 2022.

Currently, Europe has sufficient natural gas in storage – at just below 70% of capacity – to comfortably get through winter, which has been milder than normal. Any supply squeeze would depend on any unexpected acceleration of demand for natural gas and LNG.

“It’s very difficult to say how much [LNG] Europe is losing out on,” said Page. “Qatar often sends excess cargoes to Europe and that excess often depends on how much Asian buyers are requiring.”

“Qatar will have to honour the firm long-term contracts with buyers such as Italy, but it could affect countries like the UK where Qatar ‘dumps excess volume’,” she said.

No swaps?
Qatari and US LNG producers may consider swapping cargoes to more efficiently circumnavigate logistical constraints in the Suez and Panama Canals, Montel reported last month.

But while some companies may be doing this, it appeared Qatar Energy was not seeking to do so, said Page. “[Qatar Energy] doesn’t like buying from other players in the market, and we are not hearing they are buying US volumes."

Still, Icis LNG analyst Alex Froley said cargo swaps could still happen.

“It would make sense for Qatar to look for cargo swaps and other options to fulfil its contractual positions in Europe while minimising extra shipping costs,” he said.

Another option, but not yet implemented, would be to send LNG to Europe using the biggest vessels, known as Q-Max, to increase delivered volumes in a single voyage.

“It’s hard to say whether they’ll start using Q-Max,” said Page.

However, she noted another vessel operated by Shell set sail from Qatar on 31 January and was making its way around Africa, thereby indicating other companies were still shipping Qatari LNG to Europe.