SEOUL: The world’s top buyers of liquefied natural gas are seeking to defer shipments as the coronavirus pandemic cripples demand and forces more of the heating and power fuel into storage that is nearing capacity.
The move signals that efforts to contain the spread of the virus may impact energy consumption far into this year and possibly 2021, worsening an oversupply of natural gas and oil that’s punished prices.
Buyers in South Korea and Japan, including Korea Gas Corp and Tokyo Gas Co, are in discussions with term suppliers to postpone cargoes slated for delivery as far out as October, according to people with knowledge of the matter. The delay requests vary from just a few days to as late as next year, said the people, who asked not to be identified as the discussions are private.
The virus has already disrupted LNG deliveries across Asia. Indian importers this week requested further delays to shipments after the government extended a nationwide lockdown until May 3.
Meanwhile, several buyers in North Asia have exercised so-called “downward quantity tolerance” clauses in their long-term contracts, which allow them to take up to 10% less volume than originally agreed. Earlier this year, buyers in China, where the virus first hit, declared force majeure on some cargoes.
A Kogas spokesman said yesterday the company has delayed or reduced some supplies contracted for delivery this year, including from Malaysia and Qatar, without providing details on volumes, timing or other suppliers. Malaysia’s Petroliam Nasional Bhd and Qatargas didn’t respond to requests for comment.
Kogas has asked Qatargas to delay as many as 18 cargoes originally scheduled over the next six months, one of the people said. The company is asking some of the cargoes be delivered in 2021, the person said. It isn’t clear how many cargoes in total Kogas has requested to delay from all of its suppliers.
While South Korea has taken stringent measures to contain the virus, economists still expect the nation to grow this year at the weakest pace since the Asian financial crisis two decades ago, or even contract. Meanwhile, the nation’s already high LNG inventories at the end of March will limit the potential for stockpiling in the next few months, according to BloombergNEF.
Japanese firms, which include Tokyo Gas, Jera Co, Kansai Electric Power Co and Osaka Gas Co, have sought deferrals of cargoes for April, May and June, sources said. All four companies declined to comment. — Bloomberg
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