Wednesday, May 13, 2009

(This item was originally published Tuesday.)

LONDON (Dow Jones)--Qatargas Operating Company is storing some of its liquefied natural gas on vessels at sea to take advantage of current market price structure and to wait out weak demand, its chief executive said Tuesday.

CEO Faisal Al-Suwaidi, who is also Qatargas's chairman, told Dow Jones Newswires that, in line with weaker demand for gas on the spot market, the company had moved to store its LNG on the water in order to sell when prices improve. He spoke at the inauguration of the South Hook LNG terminal in Wales.

"We have been storing at sea ... It's not likely to be a trend," he said, adding that vessels have been located in a variety of locations including Malta, Fujairah and Gibraltar.

"This is a public parking space, if you like," he said.

The company can store on the water for up to 10 months at a time, but this was a temporary measure to deal with the drop in demand this year, he said.

The practice of storing at sea echoes a similar method oil majors have used in recent months to take advantage of a contango price structure. A market is in contango when prices for delivery in the near term trade below prices for delivery dates further into the future.

Although Al-Suwaidi does not anticipate natural gas demand will pick up significantly in Europe before the end of this year, or even in to 2010, he emphasized the importance of focusing on investing in production projects for the next 20 and 30 years, and joint international partnerships.

In view of the new lower energy price environment, he said he believed national oil and gas companies would be in a strong position to negotiate better terms with their existing services companies going forward.

He added that while most of Qatargas's agreements with contractors had been finalized six months ago, and only one project thus far delayed, they would be looking for competitive terms for future new projects.

-By Angela Henshall, Dow Jones Newswires; +44 (0)20 7842 9285; angela.henshall@dowjones.com

(END) Dow Jones Newswires

13-05-09 0404GMT