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One of the world’s top buyers of liquefied natural gas (LNG) is trying to defer some shipments scheduled through this year as the coronavirus outbreak cripples demand and as it grapples with brimming inventories.
The move signals that efforts to curb the spread of Covid-19 may impact energy consumption far into 2020 and possibly the next year, worsening a glut of natural gas and oil that’s punished prices.
The buyer, Korea Gas, is in discussions with term suppliers including Qatargas and Malaysia’s Petroliam Nasional to delay cargoes slated for delivery through October, according to people with knowledge of the matter. The company, known as Kogas, had already started asking suppliers to push off immediate shipments earlier this month.
Nobody responded to emails or answered calls to Kogas’ press office on Wednesday, which is a holiday in South Korea. Qatargas and Petronas weren’t immediately able to comment.
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 per cent less volume than originally agreed. Earlier this year, buyers in China, where the virus first hit, declared force majeure on some cargoes.
Kogas has asked Qatargas to delay as many as 18 cargoes originally scheduled over the next six months, one of the people said, requesting not to be identified as the discussions are private. The company is seeking for some of the cargoes to 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.
