Petroleum Africa
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Friday, June 5, 2015
Sonatrach said it plans to continue diverting gas supplies, historically bound for European markets, to Asia. The company also said it is looking at potential new long-term supply deals with South American importers. The company is in discussion with companies in Brazil and Argentina and is continuing talks with fellow North African country Egypt to provide additional LNG deliveries.
The state-run firm’s Mohamed Rafik Demmak, Sonatrach’s executive VP of marketing, said in a Reuters report that the company still saw limited opportunities in trading its LNG cargo on spot markets and would instead focus on its long-term sales model.
“The problem in Europe is a lack of demand, so we can continue to play the arbitrage by reducing pipeline flows and increasing LNG exports,” he said. Demmak went on to say that profits from LNG diversions away from Europe were being shared with its long-term customers such as ENI partly due to reduced pipeline supplies on weak demand.
“This profit sharing mechanism has been quite comfortable and allows us to react to market changes,” Demmak said. “Our priorities are still to look for stable relationships with our customers, and to achieve that you have to make some concessions.”
Demmak said the profit sharing arrangement had quieted calls from buyers to introduce greater volume and destination flexibility into long-term contracts, as this essentially reduces the need for such revisions. “We can play the arbitrage between piped gas to Europe and LNG, and we can also play the price arbitrage between Europe and the rest of the world,” he said.
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