Qatargas Sells LNG to Austrian OMV

Qatargas  has signed a sale and purchase agreement (SPA) with Austrian OMV Gas Marketing & Trading for 1.1mn metric tons (mt)/yr LNG for five years starting January 2019.

Qatar Petroleum CEO Saad Sherida Al-Kaabi, who is also chairman of the Qatargas board of directors, said December 20 that OMV provides major European customers and distributors with tailored natural gas solutions, and "we look forward to supplying them with reliable Qatari LNG."

He added that with this deal, Qatargas has once again demonstrated its ability to capture new opportunities and expand its network of customers in an evolving market.

The supply will come from Qatargas 4, a joint venture between Qatar Petroleum (70%) and Shell (30%).  The LNG will be delivered to the Gate LNG terminal in the Netherlands on board Qatargas’ LNG vessels. Last year, Qatargas produced 41.40mn mt of LNG, slightly lower than the 41.66mn mt produced in 2015. It is being merged with Rasgas, which operates the other 37mn mt/yr of national LNG output.

OMV's executive board member responsible for downstream Manfred Leitner said the agreement was in line with OMV’s gas strategy to ensure security of supply for Europe and "it supports our efforts to employ our LNG infrastructure including the Gate terminal in Rotterdam," although there was no reference to the relative prices of the latest contract and other SPAs it has.

The Gate terminal has been historically underused by the ship-or-pay capacity holders who have been forced to write down the value of their investments in it, the LNG not being competitive against other sources of gas for Europe. As Russian export monopoly Gazprom has found out, the European gas market is over-supplied on an annual basis, and hub pricing means lower revenues than in the past. US LNG is also aimed at Europe, where it too will take the hub price.

Asia remains Qatargas’ biggest market with 61% share, down from 62% in 2015. However a number of major contracts are due to expire there early next decade, and the company has been busy trying to develop new markets. Europe’s share of the imports has also declined a little from 27% in 2015 to 25% in 2016. Qatargas’ exports to Americas were a mere 1% of its overall exports compared with 3% in 2015 as locally produced gas in US has taken a greater market share to the point that it now leaves the US in search of higher priced markets.