- Chinese LNG demand is expected to be back strongly while the demand outlook for Europe and the US remains unclear.
- Woodside’s trading team has begun placing spot production back into China.
- Pollution levels are high again in China indicating that its industry has got back to work.
- Chinese LNG imports rose in the first two months of 2020 from a year earlier.
- The impact of fall in the oil price so far this year might not be realised until late in the April-June quarter.
- Woodside has hedged 11.85mn bl of oil between April and December 2020 at an average price of $33.47/bl and agreed for 255,000t of LNG production.
- Qatari state-owned QP plans to increase LNG capacity by 48mn t/yr to 126mn t/yr by 2027.
According to Woodside Petroleum, Chinese LNG demand will come back strongly, writes Kevin Morrison for an article published in Argus Media.
A strong come back
Australian independent Woodside Petroleum said, following the impact of the Coronavirus outbreak in the country, Chinese LNG is expected to come back strongly for the rest of the year. But the demand outlook for Europe and the US still remains unclear.
Spot productions back
Woodside’s trading team has recently begun placing some spot production back into China as industrial output and demand resumes.
The chief executive officer Peter Coleman said, “We are already seeing pollution levels rise again in China, which is an indication that its industry is getting back to work, and we expect LNG demand to come back strongly there.”
LNG imports raise
Despite the Coronavirus outbreak and some parts of the country under lockdown, Chinese LNG imports rose in the first two months of 2020 from a year earlier.
Sales and purchase agreement
Woodside is the operator of the 16.3mn t/yr North West Shelf (NWS) LNG venture offshore Western Australia.
The project has a 3.3mn t/yr sales and purchase agreement with Chinese state-controlled energy firm CNOOC for its 6.7mn t/yr LNG terminal at Dapeng in south China’s Guangdong province, which was signed in 2002 at a sales price of $3.20/mn Btu.
Oil price fall impact
Due to the lag between oil price and realised LNG price, the impact of fall in the oil price so far this year might not be realised until late in the April-June quarter.
The oil price is expected to be volatile at least in the near term, it said.
Hedging to increase revenue
Woodside said to to reduce exposure to potential further downside and increase its revenue it has:
- Hedged 11.85mn bl of oil between April and December 2020 at an average price of $33.47/bl.
- Agreed with a European-based energy trader to fix the price of about 2.4mn bl of oil equivalent (boe) or 255,000t of LNG production over the April-December period.
LNG demand and port restrictions
The LNG demand outlook in Europe and the US is less certain given that both regions are now bearing the brunt of the coronavirus pandemic, Coleman said.
Demand from emerging markets in Asia ex-China is also more difficult to predict because they are made up of a lot of different markets with their own dynamics and given the current port restrictions in place to contain the spread of the coronavirus, which may inhibit trade, he said.
Ongoing LNG projects
The firm today deferred the sanctioning of its Scarborough gas field offshore Western Australia, with the gas to be used as feedstock for a second train at the 4.3mn t/yr Pluto LNG venture, which is also operated by Woodside.
Coleman said that some of the LNG projects that are mainly backed by NOCs [national oil companies] will go ahead in this low-price environment.
LNG production increase
Qatari state-owned QP plans to increase LNG capacity by 48mn t/yr to 126mn t/yr by 2027.
According to Coleman :
- Qataris are already working on increasing production at the North Field and expected to continue with their expansion plans.
- Russia is also looking to expand its LNG capacity to 46mn-65mn t/yr by 2024 and to 70mn-82mn t/yr by 2035 from 18.9mn t in 2018.
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Source: Argus Media