Thursday, June 3, 2010

Qatari LNG Deliveries Slowing Down

Thanks to a reader who forwarded a great article on Bloomberg about how Qatari LNG deliveries are slowing down in reaction to the low price/high supply environment

The article is a good read because it gives a great overview of the logistics and economics of Qatari LNG.  According to the article, The Qatar Liquefied Gas Co. has idled eight of its enormous tankers off the coast of the U.A.E. with full or partial cargoes.  The Qataris aren't talking, but observational evidence confirms that the tankers aren't empty and they aren't going anywhere.  The approximate daily cost of idling a tanker with a payload on board is $21,625 per day, but a single cargo can fetch $10 million to $35 million more later in the year. 

The decision to hold supply back makes business sense.  If you have deep pockets, why sell your product for less than it's worth?  The article also notes that Qatari deliveries earlier this year intentionally have been slowed.  But if Qatar slows its LNG exports, does that mean it is cutting production?  Since the gas is more or less a byproduct of its more profitable NG liquids business, is the liquids production slowing?  Does Qatar have the storage capacity to hold several months worth of gas while maintaining its liquids production?  All questions I'm not qualified to answer, but it shows the impacts of the current natural gas oversupply are far-reaching.

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