European commodity traders won the lion’s share of a closely-watched tender to supply Egypt with $2.2 billion worth of liquefied natural gas, as they work to expand into a business typically dominated by the oil majors.
Vitol, Noble Group and Trafigura will supply most of the LNG, with oil major BP covering the remainder, traders with knowledge of the matter said on Tuesday.
The global market for the fuel was otherwise marked by receding demand, oversupply and plunging prices. LNG-AS
Trading companies are gaining a foothold in global gas trade, at times by working with oil majors especially in countries carrying credit and payment risks, while an emerging glut of the fuel also creates more space for them to operate.
“The traders are developing an increasing role for themselves in the LNG market including taking on the risk of supplying LNG to new, less creditworthy buyers who some of the more traditional players are more reluctant to deal with directly,” Andy Flower, independent LNG consultant said.
“Their ability to make commitments to these buyers without necessarily having fixed the supply is a sign of the increasing flexibility of the LNG business as it expands and new producers enter the market,” he said.
Egypt has emerged as a major new market for LNG as the government looks to ease the worst energy crunch in decades. Falling output and rising demand have transformed the country from an oil and gas exporter to net importer.
Last month Egypt’s state-owned gas company EGAS launched the tender to buy 75 LNG cargoes over a one- to two-year period.
The country of about 90 million relies heavily on gas to generate power for households and industry, but has had difficulty securing imports because it lacks a terminal to process LNG, which is natural gas chilled into a liquid state.
But after two years of delays, Egypt contracted Norway’s Hoegh LNG for a floating storage and regasification unit, opening the door to LNG imports once the terminal is operational by the end of March.
Alongside the current purchases, Egypt has struck LNG import deals with Algeria’s state-run Sonatrach for six cargoes and the trading arm of Russia’s Gazprom.
EGAS is also negotiating a five-year import deal with Sonatrach.
Officials at Egypt’s oil ministry and state-run gas company EGAS did not respond to phone calls seeking comment.
Selling prices for the current batch of cargoes were linked to Brent crude oil, with an estimated 14 percent “slope”, or percentage, to the benchmark, two trading sources said.
Global LNG prices, already at four-year lows, look set for further steep losses in the first half of 2015 as the full force of a weak crude market works through into gas contracts and new supply comes on stream.