Page 9 - AfrOil Week 20 2020

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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 Pres- ident 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 timeline for
this has not been provided. State-owned Pipe- China is developing the facility jointly with Nan- shan 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.
Latin American fuel shifts
Both Brazil and Mexico have been dealing with shifts in their domestic gasoline markets over the last week.
In Mexico, the retail fuel association Onexpo reported that gasoline consumption had dropped significantly as a result of the measures introduced to contain the coronavi- rus pandemic. The latest official data from the Ministry of Energy show that gasoline sales dropped to 538,000 bpd in the week ending on April 10, down by 32% on the figure of 797,000 bpd recorded for the week ending on March 20. Unofficial data indicate that consumption levels sank even further, falling to 319,000 bpd by late April.
The decline is likely to put pressure on fuel retailers, according to Grupo Arco, a company that operates a chain of 105 filling stations in Mexico. Nevertheless, US-based Valero has unveiled plans for expanding its downstream operations in that country. Last week, the firm said it wanted to add another 60 retail outlets to its chain in Mexico by the end of the year. Valero opened its first station in Mexico in January and has already brought the number of its outlets up to 40.
Meanwhile, Brazil is gearing up for the intro- duction of new specifications for E27 gasoline on August 3. The revised standards will affect the fuel’s Research Octane Number (RON) and specific mass. According to Argus Media, the changes in these two categories are likely to make imports of unblended gasoline more expensive, since suppliers will have to use denser gasoline components that have higher octane ratings in order to comply with specifications.
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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