France's Engie says to weather LNG oversupply with long-term deals
29/06/2017 02:52
* Has long-term supply contracts starting in next two years
* Will add U.S. LNG supplies to global portfolio for first
time
* In talks on LNG sales, regas facilities in Southeast Asia
* Sees China underground storage as potential opportunity
By Florence Tan
SINGAPORE, June 29 (Reuters) - French gas and power company
Engie ENGIE.PA expects to weather festering oversupply in
markets for liquefied natural gas (LNG) with long-term deals
kicking off in the next couple of years, a senior company
official said.
Production of the superchilled gas has been outpacing demand
as new supplies come online in Australia and the United States,
driving down Asian spot prices LNG-AS by more than 70 percent
since 2014.
"In the short-term, the market is still oversupplied," Engie
Executive Vice President Didier Holleaux told Reuters.
"Fortunately only a fraction of LNG globally is sold in the
short-term market, a significant part of it is still on
long-term contracts ... We have new long-term contracts coming
onstream in Asia next year and also the year after."
Engie a few years ago locked in 20-year deals to supply
Japanese utility Tohoku Electric Power 9506.T and Taiwanese
state firm CPC Corp from its U.S. Cameron LNG project that will
start production in 2018.
The project will add 4 million tonnes per year of U.S. LNG
to Engie's global portfolio of 16.4 million tpy.
"It's a significant diversification for us because for the
first time we'll have LNG coming from the U.S.," Holleaux said
late last week.
Meanwhile, Engie, previously known as GDF Suez, is in talks
to supply gas to Thailand and Myanmar and to build floating
storage regasification units (FSRUs) that will supply smaller
volumes of gas to power plants on Indonesian islands.
"Most of the new (regasification) capacity will be in
Southeast Asia," Holleaux said, adding that Indonesia could soon
become a net LNG importer as "their needs are increasing and
they have not had such big discoveries recently".
Engie in June supplied its first LNG cargo to Indonesia's
Pertamina from the local Jangkrik field, its joint venture with
Italy's Eni ENI.MI .
In China, after inking an LNG supply agreement with Beijing
Gas, Engie is looking at opportunities in the underground gas
storage needed to hold stocks to meet seasonal demand, Holleaux
said.
"Chinese players have now reached a technical level where
they don't necessarily need us," Holleaux said.
"It's different in underground storage where we have
specific skills and know-how and we may still help them."
China, the world's largest energy consumer, plans to
generate more electricity from gas instead of coal as it fights
pollution. urn:newsml:reuters.com:*:nL2N1GF0EN
"For a very long time, Asia, mainly Japan and Korea, has
been one of the most important markets, one of the most reliable
ones, in many years the best priced market. But times are
changing and we will adjust," Holleaux said.
(Reporting by Florence Tan; Editing by Joseph Radford)
((Florence.Tan@thomsonreuters.com; +65 6870 3497; Reuters
Messaging: florence.tan.thomsonreuters.com@reuters.net))
Keywords: ASIA LNG/ENGIE