Asia's LPG supplies pressure Mideast producers

Asia's LPG supplies pressure Mideast producers

SINGAPORE (Reuter): Increased Southeast Asian and Australian
production of liquefied petroleum gas (LPG) is expected to force
Middle East producers to lower prices next year to maintain
market share, industry sources said.

In its latest term talks to renew LPG exports with Japanese
importers, Kuwait Petroleum Corp (KPC) has slashed its offer
price from the current US$41 to $30 a ton above Saudi Arabia's
monthly Contract Price (CP).

Kuwait exports around one million tons a year of LPG to four
Japanese term buyers -- Cosmo Oil, Japan Energy, Mitsui Oil and
Gas and Idemitsu Kosan.

"Swamped with options to obtain cheaper sources of LPG
supplies from Indonesia, Australia and Malaysia starting next
year, Japanese importers are holding at $27-28 over the CP and
are unwilling to move any higher," said a Japanese term buyer.

Japan, the largest LPG importer in Asia, was recently coaxed
by non-MidEast producers to absorb the surplus supplies coming
on-stream next year.

"The market is going to be flooded with LPG supplies next
year," the Japanese term buyer said. "Fresh supplies from
Australia's NorthWest Shelf project at around 550,000 tons per
year are scheduled to hit the market next year," he said.

In addition, there will be increased production from Indonesia
as new fields come on-stream and a projected rise in exports from
Thailand as its new gas separation plants start operations, he
said.

Besides Kuwait, Abu Dhabi's recent attempt to increase term
sales also received cold response.

State-owned Abu Dhabi National Oil Company (ADNOC) has floated
a tender in September to sell 14 cargoes of 44,000 tons each for
deliveries over a period of five quarters from October this year,
or 21 cargoes over a seven-quarter period.

Poor bids at around $20 discount fob to the CP has led the
company to allocate a part of the supplies to a previous term
contract holder at reduced price, said industry sources.

Late last week ADNOC floated another tender to sell an
additional four cargoes for delivery in the first quarter of next
year. "The new tender is unlikely to receive attractive bids,"
said one Japanese importer.

Qatar is also threatened by recent offers from non-Mideast
producers. Some Japanese term importers of Qatari LPG are
considering not to renew current term contracts. Qatar exports
close to one million tons of LPG a year, mostly to Japanese
buyers.

Japanese importers told Reuters that almost all imports from
next year will be on a term basis, compared to previous years
when term imports only accounted for up to 75 percent of total
imports.