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Cheniere: no impact on LNG production from coronavirus precautions
US GULF COAST
CHENIERE Energy, the leading US exporter of the super-chilled fuel, has said it does not expect the steps it has taken to protect its workers in the midst of the coronavirus pandemic to have an impact on its production.
The steps the company is taking include reducing large group meetings and non-essen- tial travel, as well as implementing schedules for working from home in an effort to support con- tinuity in its business operations.
Reuters reported that Cheniere also said it had developed robust preparedness and business continuity plans in order to minimise impacts to normal operations during critical events.
The company has been seeking to downplay other impacts of the coronavirus pandemic in recent weeks. Earlier this year, hopes emerged that Cheniere would be able to finalise a supply deal with China’s Sinopec that had stalled as a result of the US-China trade war. A preliminary deal announced earlier this year between the two countries involved China rapidly stepping up its purchases of US energy. However, the company said in late February that it was struggling to lock in new long-term contracts with buyers. This was attributed to market turmoil, with a global glut of LNG sending many buyers to the spot market to purchase cargoes on a cheaper, more flexible basis.
This was compounded by the spread of the coronavirus – first within China and more recently across the world. While Cheniere said in early February that its sole Chinese contract cus- tomer continued to take cargoes, the company said later in the month that two cargoes for April delivery had been cancelled. These cargoes were
separately reported to have been cancelled by Spain’s Naturgy Energy Group amid the slump in LNG spot prices, illustrating the ripple effect on global markets of oversupply amid slumping demand.
“While it’s currently too early to gauge the potential impact of the coronavirus on the near- term market balance, decreased short-term LNG demand in China is putting additional pressure on the market,” Cheniere’s chief commercial officer, Anatol Feygin, said on the company’s earnings call last month.
Cheniere warned at the time that its earnings for the whole of 2020 earnings before interest, taxes, depreciation and amortisation (Ebitda) were tracking to the lower end of its guidance range of $3.8-4.1bn owing to the drop in LNG prices.
Despite these headwinds, the company is building yet more liquefaction capacity, saying it was on track to complete the third train at Cor- pus Christi LNG in the first half of 2021 and a sixth train at Sabine Pass LNG in the first half of 2023.
Cheniere has also been preparing to take a final investment decision (FID) on the Stage 3 expansion of its Corpus Christi facility, which would involve seven midscale trains with a com- bined capacity of 10mn tonnes per year (tpy) of LNG. This marks a shift away from the model for the first three Corpus Christi trains, which have a capacity of 4.5mn tpy each. However, as the economic toll from the coronavirus globally becomes more pronounced, new LNG projects that have yet to reach the FID stage look increas- ingly uncertain.™
Despite these headwinds, the company is building yet more liquefaction capacity.
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