Sign up for Next China, a weekly email on where the nation stands now and where it’s going next.
China National Petroleum Corp. has issued a force majeure on all prompt natural gas imports, according to people with knowledge of the situation, the second Chinese buyer to refuse shipments in a sign that global commodity flows may face a sustained impact from the coronavirus fight.
CNPC, the parent of PetroChina Co., is taking the extreme step after initially working with sellers to reschedule shipments, and plans to cancel contracted deliveries of the fuel both as liquefied natural gas and via pipelines in the short-term, said the people, who asked not to be identified as the information isn’t public. At least one LNG supplier had been notified, the people said.
CNPC declined to comment.
The nation’s buyers have struggled with the impact of the virus, which has cut demand for the fuel and maxed out storage space. Firms declare force majeure when they’re unable to meet contractual obligations for reasons beyond their control.
China’s biggest suppliers of LNG include Australia, Qatar and Malaysia, while Russia and Central Asian nations — Turkmenistan, Kazakhstan and Uzbekistan — as well as Myanmar supply via pipeline. Cheniere Energy Inc., the largest U.S. exporter, has a supply agreement with CNPC but hasn’t shipped a cargo to China in more than a year after a 25% tariff was put in place. Instead, CNPC was swapping U.S. cargoes with Japan and Korea. Cheniere declined to comment.
Last month, China National Offshore Oil Corp. — the nation’s top LNG importer — made a similar force majeure declaration, a move that was rejected by some sellers. PetroChina had earlier delayed and rescheduled some LNG shipments. Chinese copper smelter Guangxi Nanguo also declared the same get-out clause in February, refusing to take delivery of raw materials.
Gazprom PJSC said its gas supplies sent to China via pipeline continue and that the company hasn’t received a force majeure notice.
Bloated Stockpiles
China is the world’s biggest consumer of most raw materials, from energy products to industrial metals, and disruptions in its purchases create havoc across global supply chains. While the nation is making slow but steady progress in its effort to get back to work, CNPC’s force majeure illustrates the lingering impact of the coronavirus outbreak on consumption.
Separately, CNPC said that it stopped pulling supplies of gas from storage tanks, and in at least one location has even started injecting it back earlier in the winter than normal, as customers have throttled back consumption amid a broader economic slowdown.
“Natural gas demand has dropped sharply,” the company said on its website, adding that withdrawals have halted at all 10 of its underground storage sites as of Feb. 29. “The volume of gas supplied from China’s storage facilities has fallen rapidly” since late January.
— With assistance by Feifei Shen, Alfred Cang, Naureen S Malik, and Olga Tanas
Source: Read Full Article
