Page 9 - LatAmOil Week 20 2020

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Under Russian law, Gazprom has exclusive rights to export Russian gas via pipeline and Moscow is unlikely to end this monopoly, through fear of creating competition between domestic suppli- ers. As such, the company will likely have to get creative in complying with EU legislation.
Belarus has been importing US and Saudi oil over the past month, as its spat with top supplier Russia continues. The market collapse means these oil supplies are now affordable, but this may not be the case for long as prices recover.
If you’d like to read more about the key events shaping the former Soviet Union’s oil and gas sector then please click here for NewsBase’s FSUOGM Monitor.
Positive signs in LNG
Some positive signs for the LNG market are emerging, though the overall picture remains bleak. A growing number of US LNG cargoes are thought to be reaching China as the Asian coun- try cautiously restarts its economy, having been the first to lock down earlier this year in response to the outbreak of the new coronavirus.
According to ClipperData, seven vessels delivered US LNG cargoes to China between April 20 and May 14. This marks the first time in over a year that US LNG has been shipped to China, and more cargoes will be on the way.
However, relations between the two countries remain fragile after they reached a preliminary Phase 1 trade deal in January that has already been severely undermined by COVID-19. Under the deal, China agreed to buy an addi- tional $52.4bn worth of energy products from the US, including crude oil and LNG.
However, lockdown put the brakes on the country’s energy demand, and initially there were also tariff issues to resolve. Beijing recently started granting tariff waivers to some LNG importers as China emerged from lockdown, prompting shipments of the fuel from the US to resume.
However, China is still set to fall far short of its target for purchases of US energy. And US
President Donald Trump recently threatened to pull out of the Phase 1 deal if China fails to meet its purchasing obligations.
This has led US industry groups to call for long-term contracts with US LNG terminals to be counted towards the Phase 1 targets.
Separately, China is continuing to expand its LNG import infrastructure. China’s National Petroleum and Natural Gas Pipeline Network Group (PipeChina) said in a May 16 statement that construction had started on a new LNG ter- minal in Yantai, Shandong Province. The facility, which is set to enter service in 2023, will have an initial capacity of 5mn tonnes per year. This will be ramped up to 20mn tpy, though a time- line for this has not been provided. State-owned PipeChina is developing the facility jointly with Nanshan Group.
If you’d like to read more about the key events shaping the global LNG sector then please click here for NewsBase’s GLNG Monitor.
Middle Eastern cutbacks
This week focuses on what might be a surpris- ing development in the oil market: the dramatic response of OPEC+ to the oil price crash by its embarking on an unparalleled programme of production cutbacks. The depth of these cuts was such that the secretary-general of OPEC expressed confidence that the worst of the oil crisis could be over. A month on from the nadir of the oil price, this is a striking view.
A second theme is the evaluation of two recent developments in the gas market. With the ripples of the oil market crash now spreading to its gas counterparts, Qatar may have to choose between curbing LNG output and risking a mar- ket share battle that hurts gas prices. Although it has an edge over rival LNG producers, it may have no choice but to cut output.
At the same time, rival moves for energy rights involving Turkey, Greece and Cyprus are afoot in the Eastern Mediterranean and Black Sea.
The number of US LNG cargoes thought to
be reaching China is growing, as the Asian country cautiously restarts its economy.
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