By Oleg Vukmanovic and Sarah McFarlane
MILAN/LONDON (Reuters) – Qatargas is looking to Britain and the Netherlands in an effort to weather a looming global glut of gas supplies by expanding import deals into Europe’s most liquid markets, industry sources said.
The world’s biggest exporter of liquefied natural gas (LNG) must lock in buyers for its unsold supply just as new Australian and U.S. producers muscle into its prized Asian markets.
Slowing demand globally is only adding to producer woes, thrusting Europe’s gas markets and dozens of under-used import terminals into the spotlight.
Qatargas has held talks with Petronas UK Ltd to gain greater access to the Dragon import terminal in Wales, as well as with Uniper, formerly known as E.ON Global Commodities, for the Gate terminal in Rotterdam, two sources said.
Uniper declined to comment, while Qatargas and Petronas did not respond to requests for comment.
Stefaan Adriaens, commercial manager at Gate, said he could not comment on whether Qatargas was interested in increasing capacity at the terminal either via Uniper or directly.
“They see competition in Asia, so if they are looking for capacity, then I presume it’s to have an alternative to Asia,” he said.
Dong Energy, EconGas, Uniper, Shell and Eneco hold Gate capacity but around 0.9 billion cubic metres remains available.
Unlike the last four years, import capacity at Gate and other northwest European terminals is becoming more valuable in response to the start of U.S. LNG exports.
“As more people are looking to Europe the capacity value has increased, whereas in other areas it’s quite the contrary. Everybody was hoping for Asia demand but there demand was slower so I think capacity value has decreased there,” he said.
In 2013, Qatargas signed a five-year deal to supply 1.14 million tonnes a year (mtpa) to Petronas’ half-share of the Dragon terminal at Milford Haven.
Qatargas 4, a joint venture between Qatargas and Royal Dutch Shell, signed the deal with Petronas, followed by a five-year agreement with E.ON Global Commodities to ship 1.5 mtpa to the Gate terminal.
Both deals are flexible, according to the original announcements, meaning Qatar is not obliged to ship any LNG to Britain or the Netherlands and can divert cargoes at will.
At the time, companies with import rights at Dragon and Gate were eager to drum up business and effectively gave Qatar free options to make use of their capacity.
While Qatari deliveries to Dragon/Gate have been rare up to now, weak Asian demand coupled with surging supply makes Europe an increasingly attractive destination for cargoes.
Talks between Petronas and Qatargas over expanding the existing deal at Dragon initially sought to double volumes and extend the duration of the deal by up to 10 years, one of the sources said.
A proposal was also made to commit Qatargas to delivering a third of the overall volume, he said.
At Gate, the choices boil down to exacting supply guarantees from Qatargas or making it pay for optional import slots, sources said.
(Editing by Dale Hudson)