Surplus LNG cargoes offered to Asia amid weak US, European demand

Singapore (Platts)--26May2006

Surplus LNG cargoes from Oman, Algeria and Trinidad & Tobago, originally
bound for western markets, are now on offer for diversion to Asian
destinations due to low US gas prices and a tank-top situation in European
markets such as Spain, industry sources told Platts this week.
In addition, African producers Nigeria and Egypt have also issued spot
sell tenders offering surplus cargoes for June loading.
Asian demand for LNG, however, is seasonally weak at the moment and will
not be able to absorb all the supplies, traders said.
"This is the wrong time (to offer cargoes to Asia)," said one LNG trader
in Japan.
Some Asian buying could be lured out if sellers are willing to accept
prices as low as $6/MMBtu to $7/MMBtu on a delivered basis, equivalent to the
current levels of long-term LNG prices paid by Asian customers, traders said.
Such price expectations are about on par with US Henry Hub gas prices--
currently at just under $6/MMBtu--and would not offer enough incentives to
sellers to divert their cargoes eastward, unless sellers are absolutely unable
to place their shipments into western destinations, one trader said.
As a result of the standoff, no spot deals for Asian destinations have
yet been concluded for June- or July-loading cargoes despite plentiful selling
interest, traders said.
One reason for the market length is a high inventory situation in Spain,
where demand has waned after the winter. There is a congestion problem at
Spanish LNG terminals and some ships arriving are unable to discharge. This is
having an impact on the shipping schedules of LNG sellers.
The Zeebrugge LNG terminal in Belgium, one of the key entry points into
European gas markets, is reportedly also experiencing congestion.
As a result of attempts to avoid sending more supplies to Spanish
terminals, at least two Omani cargoes and two from Algeria bound for Spain are
being offered for diversion to Asian destinations, a trader said.
From Trinidad & Tobago, more than three cargoes that would normally have
headed to the US have also been shown to Asian buyers during the last two
weeks, although at the moment there is only one on offer, the trader added.

EGYPT ISSUES FIRST SPOT TENDER
Apart from these diversion offers, spot cargoes from surplus production
in Egypt and Nigeria have also been put up for sale by tender.
Egyptian LNG's two-train liquefaction facility in Idku earlier this week
closed a tender offering two cargoes for June loading. The tender offered one
cargo each for the first and second half of the month on a FOB basis.
This is the first spot LNG export tender from the 7.2 million mt/year
Idku project, as well as a first for Egypt, which joined the ranks of LNG
exporters only last year. The Idku project is Egypt's second LNG facility
after the 4.8 million mt/year Damietta plant.
Nigeria LNG, which brought on line two new production trains in the last
six months, also issued a spot tender in the middle of this week offering a
cargo for loading over June 20-30, trading sources said. NLNG resumed spot
exports only last month, after being absent from the spot market since
September last year following a declaration of force majeure due to a pipeline
leak which resulted in a fire.
Given the relaxed position of Asian buyers and weak US gas prices,
however, Nigeria and Egypt may get a "disappointing" response to their sell
tenders, one trader said.

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