Spain halts LNG exports for first month since 2012 as Asian premium falls

By ANNA SHIRYAEVSKAYA
Bloomberg

Spain’s liquefied natural gas (LNG) exports will halt for the first month in two years after the premium of fuel in Asia fell to its lowest level since 2011.

No reloads are planned in February from the southern European nation’s six regasification plants, according to a monthly schedule published by network operator Enagas.

The premium of LNG cargoes for delivery within two months to northeast Asia over those in southwest Europe dropped to about 5% on Dec. 1, the lowest level in almost four years, according to data from World Gas Intelligence.

Spain, which doesn’t produce any LNG, benefited from regional price differences following the Fukushima disaster in Japan in March 2011, re-selling contracted fuel that it didn’t need to markets such as Latin America and Asia.

The price gap began to close at the end of last year as milder weather and full inventories damped Asian demand.

“Price convergence in the gas and LNG world is happening quicker than many people forecast,” said Alan Whitefield, managing director of AW Energy Solutions, a gas and LNG consultant in London.

Spot cargoes for delivery in six to eight weeks to northeast Asia fell to $8.80/MMBtu in the week to Jan. 19, the lowest level since Sept. 27, 2010, according to WGI. The price for southwest Europe was $6.95, the lowest since at least 2010.

Last year, Spain re-exported a record 62 cargoes to markets from Brazil to Japan to Turkey as gas demand contracted 9.6%, according to Enagas data compiled by Bloomberg. The nation has loaded tankers every month since November 2012, including two in January. Many contracts have so-called destination clauses, meaning cargoes can’t be diverted at sea.

No Reloads

With spot LNG “so depressed,” there will be no reloading from European regas facilities this year, said Thierry Bros, an analyst at Societe Generale in Paris.

Spain is the largest supplier of reloaded LNG, according to the International Group of LNG Importers. Terminals in Belgium, the Netherlands, France and Portugal have also resold imported cargoes.

“The first casualty will be the cargo reload market from Europe to Asia because there’s no arbitrage margin anymore, so we’re going to see that disappear to a large extent,” said Leigh Bolton, managing director of Holmwood Consulting, a Surrey, England-based energy consultant. “Pure spot trades for trading houses will become much more complicated.”

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