Escalating Qatar conflict upset LNG trade
Shell has redirected an LNG tanker ship originating in the United States destined for Dubai after the United Arab Emirates banned Qatari ships from entering UAE ports.
According to Reuters, Shell has contracted with the Dubai Supply Authority to deliver LNG which is usually sourced from Qatar, but with the ban in place, the company had to redirect the US tanker to Dubai.
“Shell, as the largest LNG trader, would have a high probability of managing some of this,” Robert Ineson, managing director global LNG at IHS Markit told Reuters.
The LNG tanker began its journey at Cheniere’s Sabine Pass LNG export terminal in Louisiana and was originally headed for the port of Mina Al-Ahmadi in Kuwait.
The move is evidence of escalating diplomatic conflict between Qatar and a number of its Middle East neighbours. On Monday, Saudi Arabia, the UAE, Egypt and others severed diplomatic and transport links with the tiny Gulf state after it was accused of sponsoring terrorism.
Reuters reports on Thursday, there was a cluster of 17 LNG tankers are now moored off the Qatari LNG export facility at Ras Laffan. On Monday, there were seven tankers anchored in the area.
Since Monday, gas prices in the United Kingdom have spiked due to the conflict. After two Qatari tankers bound for the UK changed course, the UK National Balancing Point (NBP) price for July TRGBNBPMN7 is up over 4.5 per cent.
Traders say the tankers may have been diverted around the continent of Africa, rather than navigate the Suez Canal, which is where they were initially expected to travel.
Egypt has banned Qatari ships from its waters, even though it is bound by international treaties to allow passage.
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Analysts are so far unconcerned that the conflict with Qatar will result in an interruption of supply in the LNG market.
“Only Egypt and the UAE are boycotting Qatari cargos so they are the only countries that might see U.S. volume replace Qatari,” Theodore Michael, senior LNG analyst at energy data provider Genscape told Reuters.
Despite the boycott, Egypt continues to buy Qatari LNG brought in by Swiss commodity trade houses, like Trafigura, Glencore (GLEN.L) and Vitol. Analysts say the traders take ownership of the cargoes at the Qatari port and do not use Qatari ships.
According to one Reuters source, four tankers of Qatari LNG are expected to be delivered to Egypt over the next two weeks.
Qatar’s foreign minister Sheikh Mohammed bin Abdulrahman al-Thani said the UAE was “exploiting a trading position as a political tool.” He added about 40 per cent of UAE power depends on natural gas from Qatar.
As the conflict wore on and exclusion zones were activated, Qatar’s fleet of LNG vessels that had been anchored off the coast of the UAE near the port of Fujairah has moved out.
“A shutdown of Qatar’s exports, either by pipeline or via LNG, would be highly disruptive to global gas markets. We think this is not likely.”
