Middle East & North Africa

Published at 08:46 30 Apr 2019 by

March LNG imports by countries in the Middle East and North Africa (MENA) were extremely weak in March, but they should rise sequentially from here as summer cooling demand kicks in, with Ramadan likely to provide a further boost in May. Turning to exports, Egyptian loadings should begin to pick up in Q2 19 even with high domestic demand, and the destinations for cargoes from the UAE are beginning to diversify with the end of the long-term contract with Japan’s JERA. Looking further ahead, Qatar has launched the engineering, procurement and construction (EPC) tender for four new 8.8 Mtpy liquefaction trains and aims to complete the expansion in 2024.

March imports fell m/m to just 0.12 Mt, all of which went to Kuwait, although this country still received less than in March 2018. Total MENA imports were lower y/y by 0.56 Mt, and in a continuation of recent trends, Egypt and Jordan together accounted for the vast majority (84%) of the decline due to the growth in Egyptian domestic gas production.

Demand losses should ease over the summer…

Cooler-than-average temperatures across the region in March will not have helped demand, although the impact of temperatures on power demand is relatively limited until May, when cooling demand starts in earnest. The timing of Ramadan may provide a further boost to demand in May—it occurs almost entirely in May this year, as opposed to being spread between May and June in 2018—since people often spend more time at home while fasting, boosting domestic air conditioning usage. 

Over Q1 19, MENA imports of LNG totalled just 0.4 Mt compared to 1.7 Mt in Q1 18. We maintain our forecast for imports to total 2.0 Mt in Q2 19 and 3.2 Mt in Q3 19. This limits the y/y declines in summer imports to 1.4 Mt, primarily due to a weak base for the UAE in Q2 19. Egypt and Jordan will remain a drag on regional imports over the summer, as they imported 1.44 Mt and 1.23 Mt respectively over summer 2018, but this trend will fade as we get into 2020.

…while exports benefit from several trends

MENA exporters loaded a total of 9.49 Mt in March, higher y/y by 0.55 Mt. Algerian exports hit 1.40 Mt, higher y/y by 0.57 Mt and the highest since August 2017. LNG volumes were boosted by another sharp drop in pipeline exports to Europe, and the y/y change was inflated by maintenance at a Skikda LNG train over March and April 2018. However, pipeline exports were lower y/y by the equivalent of almost 2 Mt, so the overall trends in Algerian gas production and exports remain grim, a situation that is unlikely to be improved by the current political instability.

Egyptian exports remained relatively low in March at 0.22 Mt (+0.08 Mt y/y); priority is on meeting domestic demand and boosting pipeline flows to Jordan, as confirmed by the sharp drop-off in LNG imports by both countries. Still, Q2 19 should see higher export volumes as Egas has run several tenders for cargoes loading during the quarter. We expect Egyptian LNG exports to reach around 0.75 Mt in Q2 19, up from a marginal 0.07 Mt in Q2 18.

The UAE finds new buyers and Qatar expansion advances

Meanwhile, the UAE exported 0.47 Mt, broadly flat y/y and showing no sign of a slowdown as Adnoc reaches the end of its long-term 4.7 Mtpy supply deal with Japan’s JERA, requiring the UAE to diversify its markets. Adnoc will only sell around 0.45 Mt to the Japanese firm under a new three-year deal and has also signed three-year agreements to supply volumes to three trading houses. An early indication of the impact on tradeflows is that 0.25 Mt of the March loadings have been directed to India according to cargo-tracking data from Kpler, with April exports showing a similar trend. Emirati volumes are likely to continue heading to Asia but to a wider range of destinations.

Finally, in mid-April Qatar Petroleum (QP) formally invited bids for the engineering, procurement and construction (EPC) of its planned North Field expansion project. The tender is for four 8.8 Mtpy liquefaction trains, which will boost Qatar’s total capacity to 112 Mtpy. QP has been in discussions with several IOCs and still aims to secure partners for the expansion, so launching the EPC itself is likely a tactic to demonstrate it is not dependent on outside support. The timeline is to award the tender in January 2020 and for the expansion to be completed in 2024.

Fig 1: Y/Y change in LNG imports, Mt Fig 2: UAE LNG exports by destination, Mt
MENA_April2019_Fig1 MENA_April2019_Fig2
Source: Bloomberg, Energy Aspects Source: Kpler, Energy Aspects 

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