Page 6 - AsiaElec Week 16

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KOGAS reportedly asks to defer LNG shipments
SOUTH KOREA
KOREA Gas (KOGAS), one of the world’s lead- ing buyers of LNG, has reportedly asked some of its suppliers to defer shipments of the fuel as the coronavirus (COVID-19) pandemic continues to depress demand.
Both Reuters and Bloomberg reported the news on April 8, citing industry sources famil- iar with the matter. It is not yet clear whether the suppliers have agreed to defer cargoes as requested. According to Bloomberg’s sources, state-owned KOGAS started discussions on the matter this week with suppliers that include France’s Total and Malaysia’s Petronas.
The suppliers involved have term contracts with KOGAS. It is not clear which other suppli- ers may have been asked to defer cargoes, but the company has a wide variety of contracts, includ- ing with Russian and Qatari suppliers.
Data from industry group GIIGNL show that KOGAS buys 2mn tonnes per year (t/y) from Total under a contract that runs until 2031, and a further 2mn t/y under a 20-year contract with Petronas that runs until 2028.
One of Reuters’ sources said downstream demand had taken a hit in South Korea and had resulted in high inventory levels for KOGAS, leading the company to ask for the deferrals.
“Korea has been seeing more demand destruction for power and gas, as some factories cannot run due to a lack of parts being imported from other countries,” Reuters quoted one of its sources as saying. “The supply chain disruption is being realised ... so the demand view is very bearish,” the source added.
As South Korea is the world’s third-largest importer of LNG, any significant fall in deliver- ies of the fuel into the country could put further downward pressure on spot prices. This comes as LNG spot prices are already being battered by the combination of global oversupply and cratering demand, and indeed they fell to record lows last week.
Buyers in other Asian countries including India and China have also requested cancella- tions and delays of cargoes in response to market conditions.™
India’s gas demand falls during lockdown
INDIA
INDIA’S ongoing lockdown in response to the coronavirus (COVID-19) pandemic has seen industrial demand for natural gas plummet.
Enough numbers of consumers have asked Oil and Natural Gas Corp. (ONGC) to reduce their gas supplies for the state-run major to have slashed production by more than 15%, local newswire PTI quoted unnamed sources as say- ing on April 13.
ONGC’s sales have reportedly dropped from 50mn cubic metres per day prior to the start of the lockdown on March 25 to 40 mcm per day at present. This has driven the producer to cut out- put from 64.3 mcm per day to 53.4 mcm per day.
PTI said end-users had also asked state-run utility GAIL (India) to reduce supplies, resulting in a drop in sales from about 115-120 mcm per day prior to the lockdown to 76 mcm per day.
The newswire quoted one source as saying: “There is about 30% hit in the gas that is being transported through GAIL [India] pipelines.”
Most industrial consumers seeking changes in their supply are understood to be small businesses and city gas distributors. Retailer Indraprastha Gas, for example, has reportedly shut two-thirds of its CNG retail pumps.
The nationwide 21-day lockdown was orig- inally slated to be lifted on April 14, but Indian Prime Minister Narendra Modi has opted to extend it until May 3.
While Modi has acknowledged the economic impact of the lockdown, he said the benefits out- weigh the cost. The president said: “We will have to keep a close and strict watch on the places which run the risk of becoming hot-spots. The creation of new hot-spots will further challenge our hard work and penance.”
Commenting on the extended lockdown, global energy consultancy Wood Mackenzie said: “India’s gas demand has been severely affected, primarily across the transport and industrial sectors. As a notoriously price-sensi- tive market, low oil prices are also a competitive threat to gas. High inventories are resulting in refiners further reducing margins for oil prod- ucts to compete with gas, leading to downside risk on the LNG demand outlook.”
It added that the forecast decline in LNG demand from India, the world’s fourth-largest importer, was “bad news for the already over- supplied LNG market”.™
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