Regasification from the South Hook LNG terminal looks set to fall to its weakest amount for a quarterly period in at least six years with a steep fall in the number of Qatari LNG tankers berthing at the facility, an analysis by S&P Global Platts showed.
So far in the fourth quarter, South Hook has sent a total of 649 million cu m into the UK National Transmission System, which is 79% lower than the October 1-December 21, 2015, period and 70% shy of the regas levels seen during the first 82 days of the third quarter, National Grid data showed.
Regas levels from South Hook have been much lower in comparison with previous quarters on the back of a steep decline in the number of Qatari LNG tanker arrivals at the facility.
With no other Qatari LNG tankers due to berth at South Hook before the end of the year, a mere five vessels have arrived at South Hook since the beginning of the winter delivery period compared with 16 in Q3 and 25 in Q4 2015, data from Platts Analytics' Eclipse Energy showed.
By contrast, during October and November, Qatar delivered a total of 49 LNG tankers to the Middle East, up from the 30 deliveries received during the same two months of 2015, despite maintenance at Qatar earlier in Q4.
Demand in the Middle East and South Asia has increased with the introduction of new market participants which began importing last year, with countries like India, Egypt and Pakistan taking on significant volume over the year.
In India, contract renegotiations with Qatari suppliers completed at the end of 2016 for adjusted pricing and more volume began to kick in over 2016, while Pakistan had signed a new long-term contract with QatarGas in Q1 2016.
This resulted in strong, steady term deliveries into South Asia for much of the year.
At the same time, there was high spot activity into Egypt, with the country's gas incumbent issuing three tenders during the year for delivery into its two floating storage and regas units, with much of the volume supplied by Qatari production.
With firm demand and stable pricing available in the Middle East and South Asia from a combination of tenders and term agreements, portfolio optimization into these markets has become more attractive for Qatari production.
The geographical location of these markets has also lessened costs for transportation compared with the historical backstop of European destinations including the UK's South Hook terminal, for which Suez Canal fees would also need to be paid.
Ultimately, the presence of firm demand in a nearby market with lower shipping costs has competed with the UK for Qatari deliveries, and this could extend into next year.
Egypt recently completed a fourth tender toward the middle of Q4, which will see 65 cargoes delivered into its FSRUs over 2017. At the same time, Pakistan will see its second FSRU arrive in 2017, allowing for greater uptake of gas into its downstream markets.
