Page 6 - AsiaElec Week 08

AsiaElec COMMENTARY AsiaElec
Further down the chain
Exmar’s troubles with Tango FLNG highlight the potential for coronavirus to cause trouble in every corner of the oil and gas industry
GLOBAL
WHAT:
The Bank of China has postponed the release of funding for Tango FLNG because some of its offices have been closed
WHY:
The virus outbreak has the potential to affect oilfield service providers and sources of short- term credit
WHAT NEXT:
Companies that have turned to China for credits may need to find other lenders
THE coronavirus outbreak in China has already had a significant impact on the oil and gas industry.
Expectations of a slowdown in Chinese energy demand have roiled world commodity markets. They have brought prices down and have blunted the impact of events that would typically have had bullish implications, such as the loss of more than 1mn barrels per day (bpd) of Libyan crude production.
The spread of the virus has also disrupted the logistical end of the business. Multiple LNG and crude oil tankers have had to start functioning as floating storage facilities, since their cargoes are stranded as a result of staffing shortages at Chinese ports.
Meanwhile, one of China’s largest LNG importers, state-owned China National Offshore Oil Corp. (CNOOC), has fallen into a legal dis- pute with Royal Dutch Shell (UK/Netherlands) and Total (France) as a result of its decision to cite force majeure as justification for its cancella- tion of scheduled LNG deliveries. Both of these majors have rejected CNOOC’s move, not least since they cannot easily divert their tankers to other destinations or move their fuel back into storage. (Mild winter weather in the Northern
Hemisphere has curbed demand for LNG in other markets, and long-term storage is a costly option.)
These disruptions are hardly surprising. China has for some time been the largest source of growth in global energy demand, and it is also the world’s largest importer of crude oil. As a result, events that undercut Chinese economic activity will inevitably have direct consequences for price dynamics and for the movements of tanker fleets.
But the impact does not stop there. The virus is also having a ripple effect on other aspects of the oil and gas industry. This essay will look into one example of disruptions in energy financing – specifically, the release of funds for Argentina’s only natural gas liquefaction and export facility.
Release of funds
In late January, Exmar (Belgium) said that China Export Credit Insurance Corp. (Sinosure) had authorised the release of some $40mn from the debt service reserve account (DSRA) established for a $200mn loan facility extended by the Bank of China (BoC) and Deutsche Bank.
In a statement, it indicated that it intended to use these funds to keep the Tango floating LNG
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w w w. N E W S B A S E . c o m Week 08 26•February•2020