LNG

POSCO International, the energy subsidiary of South Korean steel company POSCO, has held a ground-breaking ceremony for a planned new LNG terminal near the site of the existing Gwangyang facility in South Jeolla province.

The future expansion of natural gas is underpinned by the development of new resources in gas-rich producing countries, which will expand LNG export capabilities, according to a new French report.

PetroChina posted a wider first-half overall net losses and falling revenues, including on imports of LNG and pipeline gas, but said it was optimistic for rest of 2020 on Chinese domestic demand.

The state-controlled Chinese major said in a Web-based earnings presentation that first-half net losses came to 29.98 billion Chinese yuan ($4.39Bln), of which the loss in the second quarter narrowed compared with the first quarter, “indicating a steady improvement in business” trends.

PetroChina is the Hong Kong-listed affiliate of China National Petroleum Corp. (CNPC) and has LNG project stakes in Mozambique and Canada.

The company said first-half revenues dropped to 929.04Bln yuan ($136.06Bln), representing a year-on-year decrease of 22.3 percent.

However, the Exploration and Production segment, one of the company’s four divisions, achieved an operating profit of 10.35Bln yuan ($1.51Bln).

The three other operating segments of the Group consist of Refining and Chemicals, Marketing and Natural Gas and Pipeline.

International operations do not constitute a separate operating segment of the Group.

The Marketing division recorded an operating loss of 12.89Bln yuan ($1.88Bln), while the Natural Gas and Pipeline segment achieved an operating profit of 14.37Bln yuan ($2.10Bln).

This was 21.5 percent lower that the 18.30Bln yuan ($2.68Bln) operating posted in the first six months of 2019.

PetroChina said sales volumes of imported natural gas and LNG recorded a net loss of 11.83Bln yuan ($1.73Bln), representing an increase in losses from last year of RMB631M yuan ($92.4M) in the six months..

“Under the influence of Covid-19 and the macroeconomic downturn, global natural gas market demand declined, while the international natural gas prices dropped across the world and LNG spot prices in Europe, America and Northeast Asia hit record lows,” said PetroChina.

PetroChina operates three important Chinese LNG import terminals at Dalian and Tangshan in the northeast of the country and at Rudong in the central Jiangsu province in the coastal area near Shanghai.

PetroChina additionally receives natural gas pipeline supplies from the Central Asian states of Turkmenistan, Kazakhstan, Uzbekistan as well Russia through CNPC.

“The growth of demand for domestic natural gas slowed down and output of natural gas continued to increase relatively rapidly, while the growth of imports of natural gas declined substantially,” it added.

PetroChina said that in the first half, the overall domestic consumption of natural gas amounted to 155.6 billion cubic metres, representing an increase of 4.2 percent compared with the same period of last year.

Domestic natural gas output amounted to 95.0 Bcm, an increase of 9.9 percent versus the same period last year.

It noted that first-half Chinese imports of natural gas, both pipeline and LNG, amounted to 66.7 Bcm, representing a rise of 3.3 percent compared with the first half of 2019.

PetroChina’s managing company CNPC now imports pipeline natural gas from Gazprom Power of Siberia project as well as LNG from projects such as the Yamal plant in Arctic Russia and from PetroChina LNG agreements.

The Chinese major is part of Royal Dutch Shell’s LNG Canada project under its own name PetroChina and has a stake in the Area 4 reserves in the Rovuma Basin offshore Mozambique with Italian company Eni and ExxonMobil.

Wood Mackenzie, the UK-based energy consultants, said the while the collapse of LNG prices towards US production break-evens was foreseeable, the narrative for the rest of 2020 could not be more unpredictable.

In their latest short-term natural gas and LNG outlook, the consultants weigh the risks that coronavirus, sustained low oil prices and LNG oversupply pose to the sector this year.

“An already oversupplied LNG market comes out of a mild winter with high inventories across Europe and Asia, only to face a global pandemic which has already destroyed gas demand across China and looks increasingly set to do the same across the Asia Pacific and Europe,” explained Wood Mackenzie research director Robert Sims.

“We expect global LNG demand to grow by 6 percent year-on-year to 371 million tonnes in 2020; the numbers will need constant revision as economies around the world feel the force of the growing pandemic,” said the report.

Wood Mackenzie said the impact to gas consumption in China had been severe, as robust containment measures were quickly put in place through January and February 2020.

With a resumption in economic activity, the report estimates a full-year gas demand reduction of between 6 billion cubic metres and 14 Bcm in 2020, translating to a 4 percent to 6 percent growth in gas demand this year.

“With the daily number of new cases continuing to fall in China, policy focus has turned to gearing up economic recovery,” said Wood Mackenzie.

“Daily tariff indicators suggest transport and logistic constraints are being lifted quickly,” it added.

“Also, the government is reducing gas prices to non-residential users, which provides support to coronavirus-affected businesses to resume operations,” stated the report.

However, in Wood Mackenzie’s view these measures were insufficient to stir lost-demand recovery and new coal-to-gas switching programmes.

China’s LNG demand is expected to reach 65MT this year, representing a 6.6 percent growth year-on-year.

The report noted that in Europe, low gas prices continue to support gas-fired generation, though future coronavirus containment measures and threats of an economic downturn pose a risk to market growth.

“Worst-case scenarios could see lockdowns deployed in more countries, risking severe disruptions to global supply chains by restricting movements of people and goods,” said Wood Mackenzie.

One outcome of the oil slump appears to be that sustained low prices supports coal-to-gas switching in the power sector but hurt US producers

Wood Mackenzie forecasts that should low oil prices be sustained, oil-indexed LNG contracts in Japan and South Korea will become cheaper and this could disrupt coal generation in favour of gas in both markets.

This could happen as early as August 2020 and the effects would be similar to sustained low Dutch Title Transfer Facility prices in 2019 removed coal from power grids across Northwest Europe.

The consultants expect Japan’s LNG demand to grow 5.1 percent to 81MT in 2020, compared to last year.

At the same time, the forecast South Korea’s LNG demand could rise 7.7 percent to 42MT as more LNG displaces coal in the power sector of both countries.