LNGCs steer clear of Asia

Thursday, 20 February 2020
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The Wuhan coronavirus, or COVID-19 as it is now officially known, has had a negative impact on the LNGC market, which is also currently suffering from softening daily rates, due to falling prices and mild weather.

Although the situation is still fluid, at least 12 LNGCs were thought to be idle off the Qatar coast waiting to load cargoes, while around 14 have changed their destination or diverted, according to vessel tracking newswires last week.

Around 20 could change their destinations, according to various reports and up to 50 Chinese bound cargoes could be affected in the coming months.

In addition, 15 LNGCs were also in ‘floating storage’ globally, with 11 located across Asia, Rebecca Chia, an LNG analyst with data intelligence firm Kpler told Reuters recently.

China’s biggest LNG buyer China National Offshore Oil Corp (CNOOC) invoked force majeure a couple of weeks ago to suspend contracts with at least three LNG suppliers, which have thus far rejected the move.

Demand cut

ICIS, the independent commodity intelligence service, has guestimated that the virus outbreak will cut China's LNG demand by 2.9 mill tonnes this year.

Analysis of individual Chinese sectors: industrial, power, commercial, transport and residential, including an assessment of the government’s response to the outbreak, showed that:

• Full year LNG imports will fall by 4.2% to a total of 2.9 mill tonnes – around 45 cargoes.

• February imports will be down 28% to 3.1 mill tonnes, compared with the previous year.

While the calculations are focused on the perceived peak outbreak period of February - March, ICIS expects gas demand in the second quarter of 2020 to be also negatively affected.

Australian LNG suppliers are most exposed to any potential cargo cancellations by Chinese buyers, although January volumes were unaffected, analysts said.

As well as becoming the world’s largest LNG exporter last year, overtaking Qatar, Australia also became the biggest natural gas supplier to China. It was the second largest supplier in 2018.

CNOOC’s force majeure decision is particularly concerning for Australian exporters who largely supply China through long-term contracts.

In January, no vessels were thought to be unduly delayed by remaining at sea with 41 Australian cargoes unloaded in China during the month, compared to 40 in November and 35 in December, Australian energy consultancy EnergyQuest said.

Illustrating the problems caused, last week, EXMAR revealed that the outbreak of the virus in China had caused further delays in fulfilling all the conditions for the release of $40 mill by the Bank of China from the Debt Service Reserve Account (DSRA) under the ‘Tango’ FLNG loan facility.

These were administrative problems that cannot be solved until the Chinese authorities officially re-open their offices, EXMAR explained. 

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