Qatar defends its Asian LNG market
Asia, Qatar’s prized liquefied natural gas (LNG) customer is attracting other suppliers eager to take a share of the lucrative market.
This changing landscape is forcing the gas giant to develop commercial savvy, using traders and tenders to draw new customers, while fighting to retain its share in the prized Asian market.
A shift is threatening Qatar’s dominance in Asia – which accounts for almost three quarters of the global market and has paid the highest prices – as Australian LNG comes into the market.
“Previously Qatar’s strategy had been about retaining price, in future it’s going to be about retaining market share,” said Noel Tomnay, head of global gas and LNG research at Wood Mackenzie.
“As lots of Australian LNG comes into the market, it’s inevitably going to push out some Qatari volumes from Asia,” Tomnay said.
Qatar’s strategy has changed to work more closely with trade houses who are focused on short-term deals, often in more uncertain markets, while also lowering its price prospects.
“In the past Qatar did not need to be commercial. Now they are a lot more commercial, a lot sharper,” said a trader at an international trade house. “They are dealing with traders more and have started participating in tenders,” according to Reuters.
The trade houses have assisted in Qatar supplying LNG to some of the newest importers including Egypt, Jordan and Pakistan, who are securing vast amounts via short term tenders, while Qatar’s largest customers remain in the Asian sector: Japan, South Korea and India.
The focus has moved to ‘spot’ trade in the global LNG market, as the new supply has increased uncommitted volumes. The focus was previously based on bilateral long term deals, lasting years.
“Qatar as a supplier can afford to provide their long term contracts and then on top of that they have flexible LNG to attack new markets. It’s a strategy to adapt itself to the new world,” a trader at an oil major said.
Andy Flower, independent LNG consultant, estimated in the first half of the year that Qatar’s Asia exports fell by around 2.7 million tonnes compared to the same period a year ago, Reuters reports.
Eastern Mediterranean countries, including Jordan and Egypt, on the other hand, were up by 0.4 million tonnes and exports to Europe were up by around 2.5 million tonnes.
“This suggests that they are showing increased flexibility in responding to the changes in the markets,” Flower said.
Through Qatargas and RasGas, Qatar’s major LNG producers, the country was able to produce around 77 million tonnes per year, earning it the standing of being a reliable supplier and thus able to charge a premium.
“Qatargas and RasGas are no longer averse to talking about making changes to existing contractual agreements in light of the completely changed market dynamics,” a source at importer Gail India said.
Reuters reports that neither company responded to requests for comment.