Egypt awards LNG tender for 20 cargoes from Oct-Dec

EGPC awarded Egypt’s second largest LNG tender for 20 Q4 cargoes Sept. 12, with prices ranging between TTF plus $1.5/MMBtu and $1.6/MMBtu, according to sources familiar with the matter.

The pricing is inclusive of the extended payment terms for the tender, allowing for a 180-day delay in payment. This accounted for around 50-60 cents/MMBtu of the total cost. The pricing of the tender without the extended payment term cost is reported to be between TTF plus 90 cents/MMBtu and $1.2/MMBtu.

For standard 3.5 TBtu cargoes, the purchase would cost Egypt around $45 million per cargo, or $907 million in total.

Most of the cargoes were awarded on a floating price with a TTF basis given the competitive nature of the offered TTF premiums, according to a source familiar with the matter.

The tender was heavily offered with more than 15 companies participating, added the source.

Aramco, Glencore, Gunvor, Total, BP, Hartree, BB Energy, and Shell were awarded the cargoes, according to multiple market participants. Glencore declined to comment and the other counterparties were unavailable for comment. Aramco is said to have won the most number of cargoes, around 6-7, with the rest winning cargoes between 1 to 3.

The tender covered 20 cargoes, split across three months: seven deliveries in October, six in November, and seven in December.

Of these, 17 are scheduled for delivery to the Hoegh Galleon floating storage and regasification unit at the Ain Sukhna import terminal, while the remaining three will be delivered to Jordan's Aqaba terminal, with one cargo to be delivered each month.

Pricing expectation

The prices for this tender have descended from the previous 20-cargo tender awarded by EGPC in June for Q3 deliveries.

The June tender was awarded between TTF plus $1.60/MMBtu and $2/MMBtu.

Traders were earlier expecting the latest tender to be awarded between TTF plus $1.3/MMBtu and $1.5/MMBtu.

The market was mixed about the expected prices of the tender. Some expected the prices to be lower than the previous tenders due to improved competition.

"I think the price is going to be less than the summer tender, given the higher number of participants," said a European-based gas trader.

Others anticipated higher premiums, on account of geopolitical risks, Suez Canal restrictions, elevated shipping costs during winter months and inter- and intra-basin competition.

“Cargoes for EGPC may end up being higher than previous spreads by about 0.15 to 0.2 (as spread vs TTF),” said an Atlantic-based LNG trader. “It is a complicated delivery (too many technical and bureaucratic requirements), counterparties may expect higher margin.”

Another trader sharing a similar sentiment added, “Given the exposure to winter shipping, Egypt will be paying higher prices this time around. You still have the Suez risks, credit issues and payment deferrals too which will lead them to pay a higher price.”

Sellers were heard withholding their offers to sell into the much-anticipated Egypt tender, thereby squeezing the liquidity in Europe.

The tender has been awarded at a time when Europe is having to compete with persisting Asian demand and even Latin American demand.

Platts, part of Commodity Insights, assessed the JKM/NWE spread for October to December deliveries between $1.279/MMBtu and $1.745/MMBtu Sept. 12. This could have served as the ceiling for EGPC tender award prices without accounting for the extended payment terms, several sources highlighted.

Platts assessed October DES East Mediterranean LNG at $11.584/MMBtu as of Sept. 12, reflecting a 38 cents/MMBtu premium over the Northwest European LNG market and a 17.5 cents/MMBtu premium over the Dutch TTF.