The Business Times

Patchwork LNG cargoes from Asia are helping meet Europe’s energy

Published Wed, Aug 31, 2022 · 09:06 AM

SELLERS of liquefied natural gas (LNG) in Asia are taking the rare step of packaging leftover fuel into full shipments to help meet surging demand in energy-starved Europe.

The patchwork shipments mix supplies of LNG that are left over after partial deliveries from hubs like Australia and Oman to customers in North-east Asia. The excess LNG is transferred into a single vessel out in the ocean to form a new hybrid cargo that can then be sold to Europe or another buyer in Asia, according to Bloomberg data.

Ship-to-ship transfers were identified in the waters off the coast of Malaysia in July, the first examples of the practice in 9 months, according to energy intelligence firm Vortexa. The practice is rarely carried out in the LNG market, unlike in the oil sector where blending of various types of crude is fairly commonplace.

Cobbling together this gas into a full shipment would usually be a waste of time and money, but the revived practice illustrates the extent of the global energy crunch. Europe’s energy crisis has sent demand for LNG soaring and pushed gas prices to records, making it a lucrative option.

With European prices hitting about US$100 per million British thermal units while term supplies are being sold at US$20 or below, energy majors have sensed an opportunity, traders said.

“LNG ship-to-ship transfers in South-east Asia are expected to remain active as players feed the structural energy shortage in Europe,” said Felix Booth, head of LNG at Vortexa.

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In the currently tight market, sellers are delivering as little volume as they can under term agreements, according to utilities, traders and analysts. Contracts typically allow sellers to deliver a gas volume that can be 5 per cent less than the actual amount, a clause known as minimum tolerance levels, they said.

That’s allowing majors to scrape up available supply from across their portfolio and deploy their fleet of ships, Booth said.

Ship movements

The LNG tanker Attalos arrived in Europe last week carrying 2 partial cargoes of Australian gas and a portion of Qatari gas, Vortexa data showed. Before meeting up with the Attalos in Malaysia last month, 3 vessels - Patris, Seapeak Glasgow and Kinisis - all sailed to North-east Asia to discharge part of their shipments. The Patris had called at the North West Shelf facility in Australia where BP has capacity.

A BP spokesperson declined to comment on specific cargoes, trades or vessels as part of company policy.

Meanwhile, the Flex Resolute vessel this month discharged a partial cargo of Oman-origin gas at India’s Dahej before transferring the rest of the LNG via ship-to-ship to the British Partner tanker off Malaysia, Bloomberg data showed. The British Partner also received Qatari gas from the Flex Aurora, which had sailed from Ras Laffan to Japan in July before detouring to Malaysia.

The British Partner is currently in the South China Sea.

The strategy threatens to leave less natural gas for Asian utilities, who are competing fiercely with Europe to stockpile inventories before winter. Japan-Korea benchmark prices have surged to a 5-month high amid uncertainty over the prospects for European supply as the Russia-Ukraine conflict continues. BLOOMBERG

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