LNG diversions to Europe reach double digits

: Natural gas
24/11/19

At least 11 LNG carriers have likely diverted to Europe from Asia and Egypt over the past week, as European delivered prices now offer higher returns than Asian delivered prices, and operational issues delay deliveries in Egypt.

Of the 11 cargoes, seven have diverted away from sailing for Asia round the Cape of Good Hope towards Europe, and four have diverted from Egypt, judging by shiptracking data from Vortexa (see table). This does not include the 173,400m Myrina, which was idling in the mid-Atlantic today. One carrier — 174,000m³ Aristos I — had already passed the Cape of Good Hope, before turning back towards the Atlantic basin.

Assuming all carriers are holding full cargoes, this totals around 860,000t, or 13.2TWh of LNG.

Northwest European delivered prices rose above corresponding northeast Asian prices last week, prompting diversions from Asia to Europe.

The inter-basin arbitrage was already closed, although firms with surplus shipping capacity that they viewed as a sunk cost because of long open vessel lists were still willing to send Atlantic basin cargoes to Asia as the opportunity cost of the longer journey time was limited to the cargo loss through higher boil-off during the voyage.

But Europe's discount to Asia has narrowed, and even inverted late last week, with the spread between the two markets less than the boil-off cost difference between US deliveries to Europe and to Asia, incentivising diversions to Europe.

The extra boil-off losses amount to around 39¢/mn Btu when shipping a cargo from Sabine Pass to Incheon via the Cape of Good Hope instead of Rotterdam, assuming a northeast Asian delivered price of $14.05/mn Btu, a sailing speed of 17 knots and a 160,000m³ cargo with a 0.1pc daily boil-off rate.

The Argus Northeast Asia (ANEA) January delivered price closed at a 49¢/mn Btu premium to the northwest European December des price on 7 November, enough to incentivise deliveries to northeast Asia instead of Europe for firms with sunk shipping capacity as the spread was wider than boil-off losses. But the ANEA January price on 14 November fell to a discount to prompt northwest European des prices, incentivising diversions to Europe.

And four carriers have diverted away from Egypt, where delays to a tight delivery schedule have been created by operational issues at the country's 6mn t/yr Ain Sukhna terminal, according to market participants. One of the terminal's two regasification trains has been experiencing operational difficulties, halving the terminal's regasification capacity, they said.

The country last imported a cargo on 16 November — nine days after the previous delivery. The terminal's Hoegh Galleon floating storage and regasification unit has a peak regasification rate of 750mn ft³/d (7.7bn m³/yr), equivalent to about 16,500 t/d, meaning that it could regasify a 72,000t standard-sized cargo in 4-5 days when operating at full capacity.

By Martin Senior

Diversions to Europe			m³
Carrier	Capacity	Diversion date	Approx diversion location

Diversions from Asia
BW Lesmes	174,000	13-Nov	West Africa
Gaslog Windsor	180,000	14-Nov	West Africa
Vivirt City LNG	174,000	15-Nov	West Africa
LNGShips Empress	174,000	18-Nov	Carribean
Diamond Gas Crystal	174,000	14-Nov	Carribean
Flex Vigilant	174,000	14-Nov	Carribean
Aristos I	174,000	18-Nov	Madagascar
Diversions from Egypt
British Listener	173,000	13-Nov	Mediterranean
LNG Harmony	174,000	14-Nov	Mid-Atlantic
Axios II	174,000	14-Nov	Mid-Atlantic
Pacific Success	174,000	16-Nov	South of Suez
— Vortexa, Argus

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Viewpoint: US LPG cargo premiums poised to fall

24/12/23

Viewpoint: US LPG cargo premiums poised to fall

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Viewpoint: US tax fight next year crucial for 45Z

24/12/23

Viewpoint: US tax fight next year crucial for 45Z

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Japan’s Chugoku restarts Shimane nuclear reactor early

24/12/23

Japan’s Chugoku restarts Shimane nuclear reactor early

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US House votes to avert government shutdown

24/12/20

US House votes to avert government shutdown

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