Why is Qatar diverting its LNG carriers around the Cape of Good Hope and, if this continues, how will those diversions affect global trade?
Two weeks on and tensions continue between Qatar and its neighbours, Saudi Arabia, the United Arab Emirates and Egypt.
The dispute is starting to affect LNG shipping. Qatari shipowner Nakilat has rerouted two LNG carriers sailing westbound with cargoes to the UK. The two ships turned away from the Suez Canal and are sailing around the Cape of Good Hope – a voyage twice the distance.
Last week, Fujairah banned Qatari ships and cargoes from its anchorage and bunker-supply base on the UAE east coast. Bahrain and Saudi Arabia announced a similar ban.
But Egypt’s position is unclear.
Paris-based KPLER says Qatar-linked cargoes are still sailing through Suez. And Qatar is still shipping LNG to Egypt. “We observe regular activities, so far, in Egypt, for LNG imports and Suez transits,” a spokeswoman tells us. “Vessels are not banned from either.”
However, since April four LNG carriers chartered to Qatargas have sailed around the cape, not through the canal. Some analysts think the Suez Canal Authority has raised its tolls for Q-max and Q-flex LNG carriers. These largest LNG carriers on the water all belong to Qatar.
Oxford Institute of Energy Studies (OIES) says rerouting westbound cargoes hikes up Qatar’s transport costs by fifty cents per million British thermal units.
If the dispute continues and if its ships continue to avoid the canal, Qatar could divert European cargoes to Asia. This would weaken spot prices in Asia, which could push other exporters to send their cargoes to Europe.
Click here to read more about the impact of the Arab sanctions against Qatar on LNGworldshipping.com