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(adsbygoogle = window.adsbygoogle || []).push({}); Algeria’s Sonatrach diverts Europe gas to Asia, eyes Latam LNG deals - Algeria latest news

Algeria’s state-run energy firm Sonatrach expects to continue diverting gas supplies away from Europe towards Asia as it also explores potential new long-term supply deals with South American importers, a top official said.

Algeria supplied around a fifth of Europe’s gas needs via pipelines, primarily to Italy, Spain and France, but is also the world’s seventh biggest producer of liquefied natural gas (LNG) which it exports on tankers around the world.

But Sonatrach still sees limited opportunities in trading its LNG cargoes on spot markets, focusing instead on its long-term sales model, Sonatrach’s executive vice-president of marketing Mohamed Rafik Demmak said.

“The problem in Europe is a lack of demand, so we can continue to play the arbitrage by reducing pipeline flows and increasing LNG exports,” he said.

He said profits from LNG diversions away from Europe were being shared with its long-term customers such as Eni partly due to reduced pipeline supplies on weak demand.

Algerian piped gas deliveries to Italy halved several years ago and flows have since not recovered.

Eni is Sonatrach’s biggest Italian customer.

“This profit sharing mechanism has been quite comfortable and allows us to react to market changes,” Demmak said.

“Our priorities are still to look for stable relationships with our customers, and to achieve that you have to make some concessions,” he said.

Demmak said the profit sharing arrangement had quieted calls from buyers to introduce greater volume and destination flexibility into long-term contracts, as this essentially reduces the need for such revisions.

“We can play the arbitrage between piped gas to Europe and LNG, and we can also play the price arbitrage between Europe and the rest of the world,” he said.

NEW BUSINESS

Demmak said Sonatrach was exploring new business opportunities in the form of long-term LNG sales deals in South America via discussions with companies in Brazil and Argentina.

The company continues to hold talks with Egypt over providing additional LNG deliveries on top of the six summer cargoes already agreed.

In terms of domestic exploration, Sonatrach plans to invest $40 billion over the next five years for gas exploration and production, with the same again going to oil.

Demmak said Algerian oil production was currently at 1.2 million barrels/day.

A new oil and gas licensing round open to international oil companies was expected to be launched soon, he added.

The last one in 2014 drew limited interest as sliding oil price weakened demand combined with longstanding investor concerns over unappealing commercial terms.
Source: Reuters (Reporting by Oleg Vukmanovic; editing by Susan Thomas)

Tag(s) : #Energy

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