Page 11 - AsianOil Week 15

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the US’ radar, like CPECC.
This method is also being used by Russia, and
its focus right now is Iraq and Iran, two countries that are right in the centre of the Middle East and vital to both China’s “One Belt, One Road” ambitious trade and geopolitical strategy and to Russia’s ongoing attempt to play a major role in the entire Middle East.
Majnoon is a key focus in Iraq because of the high amount of oil that has always been pres- ent there. Iraqi politicians have offered China a very favourable deal for the development of the super-giant field. Specifically, the terms of the deal are that China would obtain a 25-year con- tract but one that would officially start two years after the signing date. This would allow China to recoup more profits on average per year and to commit lower upfront investment.
Enormously beneficial for Beijing is that the methodology for working out per barrel payments would be the higher – the Chinese will choose – of either the mean average of the 18-month spot price for crude oil produced or the past six months. Additionally, China will receive a discount of at least 10% for at least five years on the value of the oil it recovered.
KOGAS reportedly asks to defer LNG shipments
Located around 60 km to the north-east of the main southern export terminal of Basra, the Majnoon oilfield is one of the largest in the world, with an estimated 38bn barrels of oil in place (OIP).
Originally awarded to Royal Dutch Shell (45%), Petronas (30%) and Iraq’s Missan Oil (25%) in 2009, the field was taken over by BOC at the end of June 2018, with operations and maintenance contracted to China’s Anton Oil- field Services (Antonoil) and the US-based KBR.
The International Energy Agency (IEA) has projected output of 550,000-950,000 b/d by 2020, and 700,000-1mn b/d at some point in the 2030s, although owing to the flooding and recent politi- cal upheavals – plus the effects of the coronavirus – the timing has slipped. With regard to the major physical challenge of the prevalent flooding in the area, China aims to shore up the site against future potential flooding and to raise output to at least 500,000 b/d by the end of May 2021.
CPECC was recently awarded the same type of contract – $121mn for engineering work – for Iraq’s super-giant West Qurna-1 oilfield, also located very close to Iraq’s princi- pal oil hub of Basra.™
PROJECTS & COMPANIES
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 crater- ing 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.™
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