Coronavirus reduces the price of LNG in the People’s Republic of China without impact on the price of pipeline gas

Coronavirus reduces the price of LNG in the People’s Republic of China without impact on the price of pipeline gas

Outbreak of epidemics of coronavirus in China brings serious adjustment in the world economy development. Experts believe that coronavirus will make especially a strong influence on the world gas market. So, the Financial Times has informed that the Chinese importers related to the importers of liquefied natural gas (LNG) connected with the state study the possibility of refusing to purchase LNG temporarily because of outbreak of coronavirus, causing reduction in demand for power resources.

The newspaper notes that demand for gas has quickly fallen, as Beijing very much tries to take the control over the outbreak of coronavirus, having closed cities and having limited trips.

The Financial Times points out that such Chinese companies as CNOOC and, probably, Sinopec and CNPC, can interpret the situation under contracts with suppliers of LNG as force-majeure. Though, according to the edition, there are questions concerning, whether the Chinese LNG buyers can connect the problems caused coronavirus with the force-majeure. After all, they are often directed to more usual problems, such as faults with the LNG terminal.

Here there is a reasonable question, whether coronavirus will affect the price of pipeline gas? As was found out by the agency “Interfax” it will not for a while. «The Chinese side did not ask« Gazprom »to change the schedule of deliveries of fuel to the main gas pipeline started at the end of the last year «Power of Siberia » in connection with the outbreak of coronavirus», – informed “Interfax” a source in the sector.

The gas pipeline «Power of Siberia» started on December 2, 2019. In 2019 it delivered 328 million cubic metres of gas – approximately 11 million cubic metres a day. Proceeding from the size of contract volume for 2020 (5 billion cubic metres), this year deliveries can fluctuate around 11-14 million cubic metres a day.

The gas pipeline Turkmenistan-China started 10 years earlier than the «Power of Siberia», and now Ashgabat is the largest supplier of pipeline natural gas to the Chinese market. Annual deliveries of Turkmen gas to the market of the Celestial Empire make up about 40 billion cubic metres.

And though now coronavirus directly does not influence the work of suppliers of pipeline gas, experts do not exclude that if the situation with the epidemic will not improve in the near future, here nay happen changes. First of all, due to the fact LNG sellers, considering that the People’s Republic of China in the long term becomes the largest buyer of gas can show flexibility, that is to yield to certain concessions. Under the present circumstances, fuel purchase under the long-term contracts connected with the oil prices, can become more expensive, than LNG purchase at the wholesale market.

Nury Amanov