QATAR - JAPAN LNG TALKS
REUTERS - Qatar Petroleum is warning Japanese natural gas buyers not to press too hard in long-term supply talks or Japanese companies could be squeezed out of Qatar's LNG projects, sources have told Reuters.
Qatar faces rising competition from a tide of new LNG from sources including Australia, which is expected to surpass it as the world's top exporter by 2019.
That has emboldened buyers as they look for lower prices and more control via shorter contracts and the rights to divert or resell unwanted cargoes, for example.
In Japan, QP, which owns producers Qatargas and Rasgas, counts on customers led by JERA, a joint venture between Tokyo Electric and Chubu Electric.
In the current contract negotiations with Japan, at stake are annual supplies of 7.2 million tonnes of gas expiring in 2021 worth some $2.8 billion, or 10 percent of QP's output.
Underscoring the depth of Qatar's ties to Japan, Marubeni Corp and Mitsui & Co each own 7.5 percent stakes in the three-train Qatargas I project.
Mitsui also holds a 1.5 percent stake in Qatargas 3.
"If Japan pushes too hard or decides to buy LNG from other buyers like Australia, Qatar has said it could force Japanese companies out of their stakes in Qatargas projects," a Japanese diplomat told Reuters.
A QP official confirmed supply renewal talks may impact Japanese ownership stakes in Qatar's LNG projects.
Marubeni and Qatargas did not return requests for comment. JERA declined to comment.
Losing its foothold in Japan would force QP to seek sales among less creditworthy buyers in Africa, the Middle East and south Asia which are riskier to deal with.
Its status in Japan is already under threat, with its market share falling 17 percent last year while Australia's jumped by 20 percent, customs data showed.
One advantage Qatar still possesses is as the lowest cost producer it can undercut on prices.
"Chubu (Electric) has enough contracted supply from Australia and the United States to manage without Qatari supply if they wanted," a source at a Japanese trading house said.
Japanese importers value longstanding business ties with Qatar and are unlikely to drop deals altogether, but the utilities are insistent on introducing more buyer-friendly terms, a Japanese trading source said.
"The flexibility to divert and cancel shipments will be one of the main demands from Japanese buyers who see themselves becoming more like traders in the years ahead," the source said, in particular reference to JERA.
Reducing volumes, shortening deals from the current 25 years, and aligning pricing formulas with market conditions will also be important, he said.
Pakistan recently struck a 15-year deal with Italy's Eni, showing how buyers are driving changes to long-term contracts.
Long-term pricing is closely tied to the price of crude oil, expressed as a percentage of a barrel's worth.
Pakistan was able to force Eni down to a price of about 11.8 percent, far lower than the 14.2 percent Japan buyers pay Qatar, industry sources said.
Slashing the premium on Japanese deals could add up to billions of dollars over a contract's lifespan.
Qatar could also be forced to offer contractual devices like those offered by some producers in Australia which protect buyers from oil price spikes.
Aside from Australia, Qatar faces an unlikely source of competition for Japanese market share from Nigeria.
Sources say the world's fourth-biggest LNG producer is courting Japan's city gas companies, power utilities and trading houses as many of its own supply deals with Europe wind down in 2021-2023.
Up to eight million tonnes of annual LNG output from Nigeria is coming off contract at that time and Japanese buyers are being targeted, according to traders.
Nigeria has LNG projects that are fully depreciated, allowing them to offer more flexible terms such as diversion rights and shorter contracts, sources said.
|May, 21, 11:10:00|
|May, 21, 11:05:00|
|May, 21, 11:00:00|
|May, 21, 10:55:00|
|May, 21, 10:50:00|
|May, 21, 10:45:00|
API - American Petroleum Institute reported that the first four months of this year saw U.S. petroleum demand average 750 thousand barrels a day above the same period in 2017 despite higher prices, a sign of solid economic activity. April also saw the U.S. produce a record 10.5 million barrels per day (MBD) of oil.
IMF - “Egypt’s growth has continued to accelerate during 2017/18, rising to 5.2 percent in the first half of the year from 4.2 percent in 2016/17. The current account deficit has also declined sharply, reflecting the recovery in tourism and strong growth in remittances, while improved investor confidence has continued to support portfolio inflows. In addition, gross international reserves rose to $44 billion by end-April, equal to 7 months of imports.
BAKER HUGHES A GE - U.S. Rig Count is up 1 rig from last week to 1,046, with oil rigs unchanged at 844, gas rigs up 1 to 200, and miscellaneous rigs unchanged at 2. Canada Rig Count is up 4 rigs from last week to 83, with oil rigs up 6 to 38 and gas rigs down 2 to 45.
REUTERS - Brent crude futures LCOc1 were at $79.57 per barrel at 0310 GMT, up 27 cents, or 0.3 percent from their last close. Brent broke through $80 for the first time since November 2014 on Thursday. U.S. West Texas Intermediate (WTI) crude futures were at $71.62 a barrel, up 13 cents, or 0.2 percent, from their last settlement.