Gazprom Export: New LNG Facilities in Doubt Due to Coronavirus Outbreak

The coronavirus pandemic might delay the launch of new gas liquefaction facilities in anticipation of stabilization of markets, the head of the Contract Structuring and Pricing Directorate at Gazprom Export Sergey Komlev said in an article for Gazprom’s corporate magazine.

“Spot LNG prices in Asia showed a phenomenal drop to levels even below Europe… Such a deep drop is caused by an extraordinary situation with the spread of coronavirus, which is why LNG imports in China decreased in January-February for the first time in a long period. This factor, of course, is the most important uncertainty of 2020, making any attempt at forecasts futile,” he said.

At the same time, according to him, the European market against this background has not yet encountered an increase in LNG volumes redirected from Asia. Thus, shipments of re-gasified LNG to European gas networks in the first two months of 2020 are below the record values of the end of 2019 by about 20%.

“The fact is that in the current low price environment, it is easier for owners of LNG batches to get rid of it at any price than to pay for transport around the entire continent … The current price level creates a situation where even the operating costs of LNG delivery can hardly be covered,” Komlev said.

Against this background, according to Kolmev, LNG producers have an incentive to postpone the launch of new capacities as much as possible, waiting for at least some stabilization of the markets.

Speaking about forecasts for the current year as a whole, Komlev noted that from the point of view of the buyer, 2020 could be another successful year amid falling gas prices; however, the situation is not that favorable for the exporters.

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