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Angola LNG and trader Vitol strike multi-year deal



By Oleg Vukmanovic and Julia Payne

Petroleumworld 09 05 2017

Angola's sole liquefied natural gas (LNG) export facility will begin delivering shipments to commodity trader Vitol later this year under a deal announced on Monday, a project spokeswoman said.

Angola LNG, which has steadied output following lengthy outages in recent years, has guaranteed Vitol access to supply for the first time, part of a wider shift in which trading companies are taking a greater share of the LNG market.

“Deliveries will start later this year, but the terms of this agreement are commercially confidential,” an Angola LNG spokeswoman said.

Vitol declined to provide specifics.

In a global first, LNG from Angola has been entirely sold via competitive tenders into the spot market, partly because the plant's original plan of shipping LNG to the United States fell through following that country's shale gas boom.

Concerns over the plant's reliability as well as limitations on feed gas supplies from offshore fields also prevented the Chevron-led project from locking-in a mid-term LNG sales deal immediately.

Output from Angola LNG stabilised this year with production on track to hit up to 3.5 million tonnes in 2017 compared with 0.77 million tonnes in 2016.

Though improved, it will still fall short of the plant's 5-million-tonnes/year design capacity.

Vitol, alongside trading rival Trafigura, was already the biggest buyer of Angolan cargoes on the spot market, trade and industry sources said.

Vitol could use its new-found Angolan volumes to help cover a 10-year obligation to supply South Korea's Korea Midland Power Co. with 400,000 tonnes of LNG annually, or to grow its share of the spot market.

A 70-percent drop in spot LNG prices LNG-AS since April 2017 and a growing supply overhang has given trading houses room to manoeuvre as established players from producers to oil majors turned to traders as a flexible source of demand.

In August, Gunvor beat Vitol to bag a 10-year deal giving it up to 2.2 million tonnes of LNG annually from Africa's first deepwater floating LNG export project in Equatorial Guinea.

That project is expected to start in 2020.

“Coupled with Gunvor's entry into Equatorial Guinea's LNG project, we're now seeing the traders committing to multi-year deals with producers for the first time,” independent LNG consultant Andy Flower said.

“This brings a new class of medium and long-term buyers into the market at a time when more traditional buyers are reluctant to enter into new term contracts because of their commitments to increasing supply from projects in Australia and the United States,” Flower added.

Claudio Steuer, director of energy consultancy SyEnergy, said Vitol's entry into Angola LNG - backed by some of the world's biggest oil companies - reflects tough operating conditions for Big Oil, facing a glut of new LNG supply competing for finite demand.

Chevron has a 36.4 percent share in Angola LNG, while Angolan state oil firm Sonangol has 22.8 percent. Other stakeholders include Total, BP and ENI .

Story by Oleg Vukmanovic and Julia Payne ; Reporting by Oleg Vukmanovic, editing by Louise Heavens and Adrew Heavens from Reuters.

09 04 2017

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