QatarGas: UK’s New Dragon LNG Deal No Guarantee Of Supply

DUBAI, Sept 23 (Reuters) – Qatargas is not obliged to ship any liquefied natural gas (LNG) to Britain’s Dragon import terminal under a five-year agreement announced last week, the world’s largest LNG supplier said.

Falling domestic gas production has made Britain heavily reliant on imports of LNG, especially from Qatar, and rising competition from buyers in Asia has stoked concerns about UK winter gas supplies.

Qatargas announced on Sept. 17 it had signed an agreement to supply 1.14 million tonnes a year (mtpa) of LNG to Petronas at the Dragon LNG terminal in Wales.

Yet there is no guarantee that any super-cooled gas will be delivered under the flexible contract, which runs from January 2014 to December 2018, with Qatargas having the option to ship all the volume elsewhere for an undisclosed fee.

“Qatargas has the flexibility rights to divert all these cargoes elsewhere. We are neither able to divulge how much of the contracted volume will be delivering into the UK or not, nor as to when such deliveries will be made,” a spokeswoman for the Qatari company said on Sunday.

“Subject to certain conditions related to timing and payment of a diversion fee, Qatargas has flexibility rights to divert all these cargoes elsewhere.”

PRICE SPIKES

Although LNG suppliers can usually sell their fuel at much higher prices in northeast Asia, winter price spikes may make the wholesale UK gas market attractive enough to ship some more cargoes northwest Europe.

Qatargas declined to comment on whether the company was also negotiating similar flexible deals with capacity holders at any other European LNG import terminals.

But sources say Qatar is negotiating deals with customers at the Gate terminal in the Netherlands and elsewhere to buy import capacity, as a fallback destination to Asia in case demand for Qatari LNG there drops.

Qatargas and its Qatargas 2 project partner ExxonMobil are already the biggest gas suppliers to the nearby South Hook import terminal at Milford Haven in Wales.

Qatargas now has the option to supply an affiliate of Malaysian company Petronas at the neighbouring Dragon terminal with fuel produced by the Qatargas 4 joint venture between Qatar Petroleum and Royal Dutch Shell.

(c) 2013 Thomson Reuters