CNOOC to declare force majeure on some prompt LNG deliveries

CNOOC is China’s top importer of LNG. (Reuters)
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Updated 07 February 2020

CNOOC to declare force majeure on some prompt LNG deliveries

SINGAPORE: China National Offshore Oil Corp. (CNOOC) has declared force majeure on prompt liquefied natural gas (LNG) deliveries from at least three suppliers, two sources told Reuters on Thursday.

This is the first known case of a Chinese company declaring an inability to fulfil a contract amid the economic impact of a fast-spreading coronavirus that has killed more than 560 people.

China is the world’s second-largest importer of LNG, and its spot purchases of the super-chilled fuel and other energy products have ground almost to a halt, but this is the first official declaration of force majeure by a Chinese company.

CNOOC is China’s top importer of LNG and operates nearly half of the country’s total receiving capacity.

LNG traders are scrambling to divert or find new outlets for the cargoes meant for China, several of them told Reuters, driving spot Asian prices to record lows.

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China is the world’s second-largest importer of liquefied natural gas.

“China was the place we sent cargoes to if demand was weak elsewhere in Asia, but now people are trying to find alternative locations,” one of the traders said.

The force majeure notice covers LNG purchase by CNOOC during the periods of February and March, said one of the two sources.

The two sources, both with knowledge of CNOOC’s move, declined to be named due to the sensitivity of the matter.

No further details were immediately available, and calls to a CNOOC spokeswoman went unanswered.

A Chinese international trade promotion agency said last week it would offer force majeure certificates to companies struggling with the impact of the coronavirus epidemic on their business to give to their overseas partners.

The top suppliers of LNG to CNOOC include Royal Dutch Shell, Total, Woodside Petroleum and Qatargas, industry sources said.

China’s own PetroChina and Sinopec also supply CNOOC’s terminals during the winter heating season from mid-November to mid-March, under a government-mandated so-called “inter-connected” supply scheme, said a separate industry official with knowledge of the matter.

It was not clear which of all these companies were issued a force majeure notice.

A Woodside representative said the Australian energy company was closely monitoring the
situation. The other companies were not immediately available
for comment.

CNOOC had been offering to resell LNG cargoes even before the outbreak of the coronavirus, with Chinese buyers grappling with high inventory amid weak demand due to a slowing economy and a milder-than-usual winter. 

Related


Japan receives first shipment of blue ammonia from Saudi Aramco, SABIC

Updated 28 September 2020

Japan receives first shipment of blue ammonia from Saudi Aramco, SABIC

JAPAN: Saudi Aramco and Japan’s Institute of Energy Economics (IEEJ) announced the first shipment of blue ammonia from Saudi Arabia to Japan on Sunday.

The shipment, which was in partnership with Saudi Basic Industries Corporation (SABIC), contained forty tons of high-grade blue ammonia, and is meant for use in zero-carbon power generation.

Saudi Aramco said in a statement that shipping challenges were overcome with 30 tons of CO2 captured during the process designated for use in methanol production at one of SABIC’s facilities and another 20 tons of captured CO2 being used for enhanced oil recovery at Aramco’s field.

Mitsubishi Corporation, which is representing IEEJ’s study team, is working with SABIC to monitor the transport logistics in partnership with JGC Corporation, Mitsubishi Heavy Industries Engineering, Mitsubishi Shipbuilding Co and UBE Industries.

“The shipment is considered the first around the world, and it represents a crucial opportunity for Aramco to introduce hydrocarbons as a reliable and affordable source of low-carbon hydrogen and ammonia,” said Ahmad Al-Khowaiter, Chief Technology Officer, Saudi Aramco, according to Saudi media.

Fahad Al-Sherehy, SABIC’s Vice President of Energy Efficiency and Carbon Management, also said: “At SABIC, we can economically leverage our existing infrastructure for hydrogen and ammonia production with CO2 capture. Our experience in the full supply chain along with integrated petrochemicals facilities will play an important role in providing the world with the blue ammonia.”

Ammonia can help supply the world’s increasing demand for energy through reliable and sustainable methods. 

The Saudi-Japan blue ammonia supply network involved a full value chain; including the conversion of hydrocarbons to hydrogen and then to ammonia, as well as the capture of associated carbon dioxide emissions.