March 16, 2010 / 4:29 PM / 10 years ago

REFILE-UPDATE 2-Algeria to ask gas exporters to cut supply

* Algeria hopes to get political support at April meeting

* Qatar declines to comment on proposal

(Refiles to complete truncated paragraph 11)

(Adds comment from Qatari energy minister)

VIENNA, March 16 (Reuters) - Algeria will ask other major gas exporters to stop flooding markets with spot gas deliveries when they meet next month to discuss the global gas glut, Algerian Energy Minister Chakib Khelil said on Tuesday.

Speaking in Vienna ahead of a meeting of the Organisation of Petroleum Exporting Countries (OPEC), Khelil said exporters needed to cut back on opportunistic gas sales which have pushed spot prices in Europe, Algeria’s biggest pipeline gas customer, down over the last year as supplies of liquified natural gas (LNG) rocketed.

A recession-driven fall in global gas demand and a surge in North American shale gas production has driven many LNG cargoes to Europe, hitting pipeline gas suppliers pricing their fuel off relatively strong oil prices harder still. [ID:nLDE624135] [ID:nLDE62B1M7]

“It’s already too liquid now, prices have been affected. All you need to do is take back some of your production,” Khelil said.

“You have to lower your supply in the spot market. How do you do that? It depends on the countries. If they want to do it they can do it,” he said.

Khelil said he would have to wait until the mid-April meeting in the Algerian coastal city of Oran to find out if there was any political will among members of the Gas Exporting Countries Forum (GECF) to cut supplies. [ID:nGEE5B71LO]

Spot LNG prices tumbled last year to around $4 per million British thermal units from record highs of around $22 per mmBtu in 2008. Although demand is recovering and new importers are emerging, large rises in output capacity will likely keep the LNG market oversupplied for the next few years, analysts say.

New LNG production facilities — which are costly to shut down during times of low demand — are expected to come online in Russia, Indonesia, Yemen and Qatar this year.

With U.S. demand for imported gas likely to remain subdued, countries like Qatar which have built more capacity to supply the North American market could be reluctant to cut sales of their biggest money makers. [ID:nGEE5B80V9]

Qatar, the world’s biggest LNG exporter, is a major contributor to the flood of LNG seen in north-west Europe over the last year as it seeks a market for cargoes that would have gone to the United States were it not for the shale gas boom. [ID:nLDE6180CW] [ID:nLDE61N13V]

Qatari Energy Minister Abdullah al-Attiyah, also in Vienna for the OPEC meeting, declined to comment on the Algerian proposal but warned against low gas prices.

“Because of shale gas some prices are very low ... We feel that this is unfair for gas,” Attiyah told Reuters.

“We cannot force anybody but we can try to convince consumers whose contracts are not related to oil, to convince them that this is not for the benefit of long term security of supply.” (Reporting by Alex Lawler and Simon Webb in Vienna; Daniel Fineren in London and Edward McAllister in New York; Editing by Amanda Cooper)

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