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Platts unveils LNG pricing marker for Middle East region

Platts unveils LNG pricing marker for Middle East region
S&P Global Platts has launched of a new Liquefied Natural Gas (LNG) price assessment for the Middle East reflecting a change to become an importing as well as exporting region.

The assessment will be known as the Platts Middle East Marker (MEM), and will complement the Platts Japan-Korea Marker, the LNG benchmark that was launched in 2009 in response to a growth in LNG spot market activity.

Shelley Kerr, global director, LNG, S&P Global Platts said: “We are launching this new assessment in response to changes in market activity. The Platts MEM price assessment is designed to reflect the growing importance of the Middle East as an LNG import destination rather than just exporter of cargoes.

“Our analysis indicates a greater tendency for new entrants in the region to use short term purchasing strategies, which is creating additional liquidity.

“This liquidity is further compounded by the participation of trading companies who are willing to take on the additional price and credit risk associated with these new buyers.”

The Platts MEM will cover the spot price of cargoes delivered into Middle East ports - in UAE, Egypt, Jordan, Kuwait - as well as in Pakistan, where over a period of two years, LNG imports have climbed from 5.9bn cu m (bcm) of gas in 2014 to 28.6 bcm in 2016.  This has been part driven by the use of FRSUs in all five markets, which allowed each country to begin importing on short notice and also rapidly expand capacity by leasing another floating unit, rather than building highly expensive onshore infrastructure.
Egypt accounts for over one third of the volume going into the Middle East, said Platts.

The Egyptian port of Ain Sukhna will be used as the basis point for the marker, reflecting the tender based procurement strategy adopted by Egypt that is driving spot market trading activity.

Deliveries into other ports will be normalised back to Ain Sukhna using an assessed freight deviation cost.

The Platts MEM will be assessed on a delivered ex-ship (DES) basis reflecting deliveries at ports in the Middle East capable of receiving cargoes with a minimum cargo size of 135,000 cu m.