Qatar spot LNG sales shrinking again - bank

Qatar may reduce the share of its liquefied natural gas (LNG) sales made on a spot basis over coming years but will still have more available for the spot market than it did before last year, according to a report by Qatar National Bank.

Until 2010, nearly all Qatar's LNG was sold under long-term deals. A large increase in production capacity in 2010, just as intended market the United States lost its appetite for imported gas, left Qatar with millions of tonnes to find buyers for.

As its new production lines ramped up towards their total capacity of 77m tonnes in early 2011, sales to the highest bidder swelled to around 28 percent of Qatari output last year, up from 9 percent in 2010 and even less in previous years, QNB said.

But Qatari concerns over finding enough long-term buyers have largely vanished since the Fukushima nuclear disaster in Japan in early 2011 turned some countries off nuclear power and towards gas, with several deals signed since then and more under negotiation set to shrink the spot share of total exports.

"In the period from 2014-21, around 16 percent of production is not covered by existing sales and production agreements (SPAs) and is potentially available to be sold on spot markets," QNB said in a research note published on Sunday.

QNB said that if talks with potential new buyers including India, Pakistan and Turkey were to result in long-term sales deals, it should keep the proportion of Qatari production sold on spot markets below 16 percent.

Twin Qatari LNG exporters Qatargas and Rasgas rarely comment on long term deals until sealed, but have announced mid to long-terms sales agreements with buyers stretching from South America to east Asia over the past year which have mopped up LNG that might otherwise have been sold in Europe on a spot basis.

QNB said the 2011 spike in spot sales was positive for Qatar as a surge in demand from Japan after its nuclear power plants were shut kept prices high.

Qatar, however, prefers long term deals linked to oil prices to protect its multi-billion dollar investments from spot gas price slumps as seen 2009-2010, and will likely sign more long term deals to further reduce spot sales if it can.

With the prospect of former major customer the US becoming a competing supplier of LNG to Europe from 2015, thanks to the shale gas boom that decimated Qatari exports to US shores a few years ago, Qatar is trying to lock most of its gas into deals with big buyers South Korea and Japan and emerging markets like China, India and Latin America where demand is rising fast.