Qatar looks to lock in LNG deals; fears price slide away from oil

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March 8, 2012

(Bloomberg; March 7) - Qatar is seeking contracts to sell more LNG to Asia as the prospect of booming supplies from Australia, the U.S. and Africa raises the likelihood of a slide in prices.  Ras Laffan Liquefied Natural Gas Co., a venture between ExxonMobil and the Qatari state, agreed last month to a 20-year deal to boost shipments to South Korea by 100 billion cubic feet a year. The company signed a similar commitment with a Taiwanese buyer in December.

Qatar Liquefied Gas Co., the world's largest LNG exporter, said March 1 it is negotiating a multiyear sale to Pakistan.  Qatar, which produces more LNG than any other country, is seeking to complete larger and longer export deals amid a surge in global supplies that's encouraging buyers to call for an end to pricing LNG based on oil. The world may face an LNG glut in the next eight years as production from hydraulic fracturing of shale deposits swells inventories, Sanford C. Bernstein & Co. said in a Feb. 14 report.

"What we are hearing is there is pressure on the long-dated pricing of LNG contracts, and it's possible that Qatar is looking at securing long-term offtake in anticipation of reduced spot prices because of a glut five years down the line," Neil Beveridge, a senior analyst at Bernstein in Hong Kong, said Feb. 29. "It's better to lock in oil-indexed prices today than have competitors from 2019 offering a price based on the U.S. spot market," Thierry Bros, a senior analyst at Societe Generale in Paris, said Feb. 29.

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