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Qatar, Russia adjust tactics for European LNG exports in March

Highlights

Tussle developing behind market leader the US

Qatar turning towards Europe amid coronavirus restrictions

Belgium's part in Russian strategy aids new import record

London — Qatar and Russia, two of Europe's leading sources of LNG, appeared to adjust their tactics for shipping the commodity to the region last month, an analysis of S&P Global Platts Analytics data shows.

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Responding to a slowdown in global economic activity triggered by the coronavirus pandemic, and intensifying competitive pressure in Europe not only from other LNG producers but pipeline gas as well, the second and third largest exporters to the continent increased their exports in March, targeting specific destinations for maximum strategic effect.

The two exporters are beginning to make inroads in and around where the US, the current market leader, is dominating.

This has seen Qatari exporters all but abandon deliveries to spot-purchase heavy Spain, and instead focus on the UK, Belgium and Italy, where state-owned exporter Qatargas holds long-term capacity.

Russian exporters, perhaps acknowledging this fact, concentrated efforts on the recently upgraded Zeebrugge LNG terminal in Belgium, touted by operator Fluxys as an attractive location for transshipment of cargoes from the Russian Yamal peninsula, and a sink for such volumes following the commissioning of a fifth storage tank at the facility.

Using this capability to full effect, Zeebrugge LNG smashed its record monthly import volume in March, and also reloaded and re-exported eight shipments to other European destinations, more than it has ever done previously, meaning that more LNG of Russian origin has likely been delivered to European hubs than was exported from Yamal.

As both strategies appear to be expanding the market share for these countries, and Qatar in particular with the potential to replicate market-leading exports seen this time last year as it diverts volumes away from coronavirus-stricken China, India and Japan, the US position in Europe could face a serious challenge.

Increasing the volume

Europe imported a total of 9.35 million mt of LNG during March, equivalent to 12.91 Bcm of natural gas. Europe's most liquid trading hubs assessed by Platts -- the UK, Netherlands, Belgium, Spain, Italy and France -- received 7.19 million mt (9.924 Bcm), reflecting an increase of 17% on the year and 14% on the month.

A new record would effectively have been set for incoming shipments if Belgium's reloads of 802 million cu m were included. Zeebrugge itself welcomed 1.994 Bcm, up 45% from the previous record in February.

The US retained market leadership by delivering 2.766 Bcm to Europe's liquid hubs, a 28% share of this market sector. Exports from the Yamal liquefaction facility reached 2.219 Bcm, a marginal increase on the month but still shy of record exports, while Qatari liquefaction terminals sent 2.111 Bcm in March, jumping 73% on the month.

Qatari exports to China and Japan noticeably decreased in March, with force majeure declarations in the former a major contributory factor.

Qatar exported just 600 million cu m of natural gas equivalent to China in March, a drop of 42% on the month, while it shipped 893 million cu m to Japan, representing a 30% decrease since February. India welcomed the equivalent of 1.392 Bcm of natural gas from Qatar, although recent declarations of force majeure following the Indian government's decision to place the entire country into lockdown to combat coronavirus could see this dented in April.

Moreover, it could also see these shipments dispatched westwards instead.

Platts analysis shows how Qatar managed, at its peak, to export 3.4 Bcm of natural gas equivalent in a single month to Europe's liquid markets during May 2019, while performing its traditional balancing role for the Asian market.

With demand conditions arguably worse this summer, as coronavirus restrictions are set to remain in force during the near-term, early indications are that we have only just seen the beginning of intensified Qatari exports to Europe.

Once a market leader in Europe prior to the commissioning of Yamal and increased US liquefaction capacity, Qatar could soon be challenging for this status once again, but will face greater competition from the US producers this time around, who themselves may have to develop an alternative strategy to cope.

EUROPEAN LNG SOURCING
(no of shipments)
DELIVERY: UK
Jan-20
Feb-20
Mar-20
TOTAL
DELIVERY: FRANCE
Jan-20
Feb-20
Mar-20
TOTAL
United States
10
8
7
25
United States
4
5
4
13
Russia
3
4
2
9
Russia
4
3
4
11
Qatar
5
3
6
14
Qatar
0
0
1
1
Norway
3
0
0
3
Norway
0
1
2
3
Nigeria
0
0
2
2
Nigeria
3
6
6
15
Trinidad and Tobago
2
2
2
6
Algeria
5
7
6
18
Eygpt
1
0
0
1
Trinidad and Tobago
0
0
1
1
TOTAL
24
17
19
TOTAL
16
22
24
DELIVERY:BELGIUM
Jan-20
Feb-20
Mar-20
TOTAL
DELIVERY: NETHERLANDS
Jan-20
Feb-20
Mar-20
TOTAL
United States
3
3
3
9
United States
4
3
4
11
Russia
7
10
11
28
Russia
4
3
3
10
Qatar
0
1
5
6
Qatar
1
0
0
1
TOTAL
10
14
19
Equatorial Guinea
0
1
0
1
Norway
1
1
1
3
DELIVERY: SPAIN
Jan-20
Feb-20
Mar-20
TOTAL
Trinidad and Tobago
0
0
1
1
United States
5
8
8
21
TOTAL
10
8
9
Russia
3
1
2
6
Qatar
4
1
1
6
Trinidad and Tobago
5
4
1
10
DELIVERY: ITALY
Jan-20
Feb-20
Mar-20
TOTAL
Peru
0
0
1
1
United States
5
2
3
10
Norway
0
1
0
1
Russia
0
0
0
0
Nigeria
2
2
4
8
Qatar
5
7
5
17
Algeria
1
0
1
2
Algeria
3
3
5
11
Equatorial Guinea
1
2
2
5
Nigeria
0
1
0
1
Angola
1
0
0
1
TOTAL
13
13
13
Argentina
1
1
0
2
Eygpt
0
0
1
1
Greece
0
0
1
1
TOTAL
23
20
22
Note: Algerian shipments approximately half the size of others
Source: S&P Global Platts Analytics