LONDON: Asian spot liquefied natural gas (LNG) prices topped $19 per million British thermal units (mmBtu) this week as tight Qatari and Algerian supplies met with winter demand, although signs of a drop off in trading activity emerged.
As prices surpassed oil-parity levels thanks to brisk demand from northern China and buying in Japan, Algerian output suffered setbacks with export plants in Arzew and Skikda both lagging.
Spot prices rose to $19.05/mmBtu on Friday, compared with around $18.85/mmBtu last week, forcing price-sensitive buyers out of the market.
Gains are triggering switching away from LNG to cheaper power generation fuels such as coal and oil where possible. Some sources said that Algerian oil company Sonatrach declared force majeure on exports from production trains 1 and 2 at its Arzew facility.
While this could not be confirmed, a source at the site said work to upgrade the ageing trains had caused production problems.
It was not clear whether Sonatrach has cancelled LNG deliveries from Arzew, or simply rescheduled shipments owing to technical issues afflicting the plant.
One trader said Sonatrach has offered replacement supplies of pipeline gas to its Spanish LNG customers.
The source at Arzew added that Sonatrach plans to start partial maintenance at trains 1 and 2 in March 2014 when train 3, which is currently under construction, starts producing.
At Skikda, Algeria's other LNG export plant, the newly refurbished 4.5 million tonne per year production train is expected to return from maintenance this week, according to a source at the site.
Any disruption in Algerian exports could dent Spain's burgeoning re-export market, tightening supplies to Asia.
Spanish buyers of Algeria LNG re-export initially delivered cargoes to higher-priced markets in Asia and South America, providing a significant additional source of liquidity for global spot markets.
The world's biggest LNG producer Qatar has committed much of its production capacity to Asian buyers this winter, including to China, South Korea and Japan, leaving little additional supply available for European consumers.
Traders said Qatar likely has a small cushion of supply left to cater to additional demand from European or other customers, albeit much less than it had last winter.
Angola's new LNG export plant is due to return from a month-long maintenance period by mid-December, a project engineer said, noting that another month long outage is planned for July.
The plant has suffered a string of production setbacks including a capsized rig offshore, delaying gas supplies from Chevron's Blocks 0 and 14.
On the demand side, PetroChina is taking in between 10 and 15 additional LNG cargoes from Qatar on top of the volumes it already receives via a 25-year supply deal with the producer, two trade sources have said.
Four of these cargoes were awarded in a recent tender. PetroChina may have also bought a December cargo from BG Group and Vitol could be sending a cargo re-exported from Europe.
The Excel LNG tanker is due to load a cargo in the Netherlands in late December, and is currently west of the Philippines.
South Korean LNG buyer Kogas has kept a fairly low profile in the market despite a corruption scandal that has led to the shutdown of several nuclear reactors. Sources have said that additional volumes from Qatar have allowed the buyer to stay out of the spot market.
In Europe, some traders reported a lack of re-export cargoes being offered for delivery to Asia.
Many cargoes from Spanish terminals, which are due to re-export six shipments in December, have already been sold to Far Eastern buyers.
There is little availability left for re-loads taking place this year out of European terminals.
Trindad's LNG export project was looking to sell one spot cargo in January, a trader said.
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