The trading unit of Electricite de France, Europe’s biggest power generator, may transport more liquefied natural gas to the UK and the Netherlands after winning a contract to buy Qatari LNG. EDF Trading Ltd said on Tuesday that it had signed an agreement with Qatar’s state-owned Ras Laffan Liquefied Natural Gas Co (RasGas) to buy as many as 4.5bn cubic metres of the fuel a year through 2011 for delivery at Zeebrugge in Belgium, equal to about 5% of annual consumption in the UK. “We can send it to the UK, France, Germany, Holland or Italy,” Eric Bensaude, who’s in charge of developing EDF Trading’s LNG business, said. LNG cargoes bound for Belgium under the contract can be diverted to ports outside Europe under unspecified circumstances, Bensaude said. The London-based unit, which last year traded enough gas to supply France for four years, owns 10% of the capacity on the Interconnector (UK) Ltd pipeline linking Belgium and Britain, Europe’s second-largest gas market. It’s also building a storage facility in Germany, the region’s biggest market. LNG is used in power plants, factories and households. Europe needs to import more gas, with U.K. production falling 8.6% last year, according to data from BP. Output declined 9% in Italy and 1.6% in the Netherlands. Europe won’t necessarily benefit from all the Qatari gas. LNG tankers can be diverted to markets where prices are higher, offering greater profit margins. Gas for next month at the National Balancing Point, the UK trading hub, yesterday traded at the equivalent of $3.64 a million British thermal units (Btu), ICAP prices showed. That’s about half the $7.09 at the Henry Hub in the US, the world’s biggest gas market. July-delivery gas at the Netherlands Title Transfer Facility traded at $4.14 a million Btus. “Some ships could go elsewhere,” Philippe Torrion, EDF Trading chief executive officer, said. Torrion declined to comment on who decides the final destination of cargoes from Ras Laffan Liquefied Natural Gas, or on what portion of profit from diverted cargoes EDF Trading receives. He also declined to say how the price EDF Trading pays for the gas is determined, citing commercial confidentiality. EDF will benefit from the Qatari supply as it builds or converts gas-fired power stations in the UK, France and Italy to provide an extra 3,000 megawatts of capacity by 2010, Bensaude said.
The company sells about two-thirds of its gas to traders and uses the rest for its own generation. The fuel may be sent to a proposed storage site in northern Germany, which is slated for completion in 2010, Torrion said. Such facilities allow traders to buy gas when it’s cheap and sell when prices rise, particularly during winter cold snaps. EDF Trading owns a gas storage facility in the U.K. Zeebruuge, Belgium’s only LNG terminal, can berth up to 60 tankers a year and will double its capacity in 2007 to import as much as 9bn cubic meters a year. RasGas, is a state-controlled company in which ExxonMobil holds a 30% stake. It said in April that it may increase LNG capacity by 40% to 36mn tons of LNG by 2009, about three times current US consumption. Qatar last year overtook Indonesia to become the world’s largest LNG exporter and plans to expand capacity to 77mn tons by the end of the decade, about a third of world supply “It’s clear that we have to be involved in LNG because it’s playing a more significant role in the European gas market, which will become more and more open in the coming years,” Torrion said. LNG is important for security of gas supply because it can be shipped to locations where there’s limited or no pipeline capacity. Europe relies on Russia for about a quarter of its natural gas. “There’s a significant pressure for the European Commission to get a more open market” for gas, Torrion said. Once the EU pipeline network is more joined, allowing more competition, “you will have a significant link between the natural gas markets of the world.”

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