Gas & LNG in Review: February 07-12, 2016

Alexandra Marie Ferraro's picture
Alexandra Marie Ferraro, Energy Analyst, Guest Reporter
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This week’s gas news was rich with country-level dynamics, a leadership change, and agreements to keep an eye on. Here are the highlights for a quick recap:

Qatargas in New Agreement to Supply LNG to Pakistan State Oil Company. Qatargas announced on Wednesday it has signed a 15-year Sales and Purchase Agreement to supply 3.75 million tonnes per annum of LNG to the Pakistani company. The first delivery is expected for March 2016. The Chairman of the Qatargas Board of Directors, Mr. Saad Sherida Al-Kaabi, said it was “the first direct long-term agreement between the two companies.”

Bloomberg reported that Qatargas will supply the negotiated LNG from joint venture plants it operates with ExxonMobil and Total. Although Qatargas did not reveal the value of the agreement initially, Bloomberg cites that Pakistan’s Prime Minister Nawaz Sharif said on Thursday in Doha that the deal is worth $15 billion and expected to meet one-fourth of Pakistan’s gas deficit.

Qatargas is the world’s biggest producer of LNG. How does this agreement strengthen Pakistan’s relationship with Gulf countries? Can we expect more deals in the future? Leave your comment below.

European Commission to Sign Proposals for Gas Security. The Wall Street Journal reported that an agreement on European Commission proposals seeking to secure European gas supply has now been postponed until next Tuesday. The proposals are specifically directed at strengthening intergovernmental agreements within Europe to better manage potential disruptions in natural gas supply, as was the case in the 2006 and 2009 interruptions of Russian gas.

According to the WSJ, the Commission has postponed the agreement as it reviews the region’s competition rules to avoid market dominance by one nation or another. A Financial Times article explained that under the new plan, Europe would be zoned and nations within respective zones would be expected to develop crisis plans to secure stock and strengthen infrastructure. The Commission seeks to oversee this process.

This is another step in several attempts by the Commission to strengthen supply and minimize member states’ vulnerability in the face of a major Russian gas interruption. Its desire to manage and monitor aspects of the proposed process is controversial in an open market environment. States such as Poland have strongly supported increased oversight in gas contract negotiations while others remain skeptical.

Will the proposal succeed in creating a single European gas market, or will it further divide existing fractures in this volatile market? Tell us what you think.

Mexican PEMEX Undergoes Leadership Shift. José Antonio González Anaya, appointed by Mexican President Enrique Peña Nieto, will replace Emilio Lozoya Austin as the Chief Executive Officer of Pemex, Mexico’s state-owned energy giant. The decision follows a whirlwind of financial issues and the weight of plummeting crude prices.

According to the New York Times, Mr. Anaya has noteworthy experience in the Mexican government as an economist in the country’s Finance Ministry where he also served on Pemex’s board, and as the head of Mexico’s social security institute. The company has struggled with a significant drop in production, a high tax burden, and tensions with labor unions, reports the NYT.

The leadership change takes place at a crucial time in Pemex’s history. Will the company shift its sights towards new investments, markets, and ventures or remain held down by continued domestic obstacles? Leave us a comment.

Norway Poised to Overtake Russia as the Top Gas Supplier to Lithuania. According to Reuters, Lithuania’s Energy Minister Rokas Masiulis said on Monday that pending LNG infrastructure developments in 2016, Lithuania will begin importing more gas from Norway than Russia. In an email, Mr. Masiulis informed Reuters that, “Based on current plans, Statoil's market share [in Lithuania] will increase to more than 50 percent this year.”

Gazprom was Lithuania’s sole supplier of gas until the latter’s 2014 construction of a floating LNG terminal. As the country’s long-term contracts with Gazprom inevitably reach their expiration, Lithuania’s positioning vis-à-vis new suppliers will be interesting to watch. This comes at a time when Lithuania has demonstrated a strong desire to strengthen its relationship with Norway. Vamping up LNG import capabilities could open access to new markets, and could conceivably include LNG from beyond Norway and Russia.

Although the Lithuanian market only constitutes a small fraction of Gazprom’s business, how do these words by the Energy Minister influence political dynamics in the region? Let us know your thoughts.

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