Traders competing to buy spare Nigerian LNG cargoes for Egypt

LNG traders are now competing to buy spare Nigerian cargoes to supply Egypt as the country gears up to become a top-paying LNG importer potentially increasing gas prices in northwest Europe.

Europe is likely to attract fewer liquefied natural gas (LNG) shipments than previously expected this summer.

While analysts still expect more LNG to land in Europe this year than in 2014, forecasts will be tempered by increased competition with Egypt, signalling tighter supplies at a time when Dutch authorities move to limit production from Europe’s biggest gas field.

That may force gas prices higher in northwest Europe as utilities look to refill depleted inventories, analysts said.

A year-long demand slump in Asia, the world’s biggest LNG market, has triggered a rush of sea-borne deliveries to typically overlooked European ports over the past two months, raising expectations that more will come during the summer.

Qatar is the world’s biggest LNG exporter and a major supplier to Europe’s most highly traded gas markets in Britain, Belgium and less frequently the Netherlands.

But with Egypt beginning LNG imports from April with roughly 31 cargoes due this summer at price premiums to Europe, some traders are working to re-route supplies.

Trafigura, Vitol and Noble Group have arranged to supply about 49 cargoes to Egypt over the next two years, with a further six agreed with Algeria for this summer.

That equates to about 1.5 billion cubic metres of summer gas, according to one analyst’s calculations, which exclude a 21-cargo deal being finalised by BP.

Trafigura’s two-year, 33-cargo commitment to Egypt will be met largely by Qatari production, traders said, which may lead to lower than expected Qatari deliveries to Europe, Dubai and India in the summer months.

Qatar is also due to supply Pakistan and Poland under new supply deals starting this summer, further tightening availability to key terminals in northwest Europe.

The remaining Egyptian supply will need to be sourced from nearby Atlantic production plants, picking off cargoes otherwise earmarked for Europe. Any strong Asian spot LNG price recovery could bleed away more Atlantic supply into eastern markets.

Gazprom is also working to conclude a separate multi-cargo supply deal with Egypt.