China’s Top Gas Importer PetroChina Declares Force Majeure on Imports–Sources

March 5, 2020 Updated: March 5, 2020
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SINGAPORE—China’s top gas importer PetroChina has declared force majeure on natural gas imports, including on liquefied natural gas (LNG) shipments and on gas imported via pipelines, following the coronavirus outbreak, four industry sources told Reuters.

The company issued the force majeure notice to suppliers of piped gas and also to at least one LNG supplier, though details of the force majeure notice could not immediately be confirmed.

Force majeure refers to unexpected external circumstances that prevent a party to a contract from meeting their obligations.

PetroChina did not immediately respond to requests for comment. A spokesman for state firm KazTransGas which handles gas exports had no immediate comment.

PetroChina meets 40 percent of its total gas needs through imports and about 70 percent of imports are through pipeline gas from central Asia, Burma (also known as Myanmar) and Russia while the rest are through LNG, one of the sources said.

“The supply cuts will fall on suppliers proportionately but LNG suppliers will have a lesser impact versus those on piped gas,” said one of the sources with direct knowledge of the situation.

It was not immediately clear what volumes PetroChina had declared force majeure on or the time period the notice covers.

But one major LNG supplier to the Chinese company told Reuters that PetroChina had requested some cargos be deferred to the third quarter instead.

For piped gas, PetroChina will be likely to ask for a cut in daily nominations, the first source said.

Last month, the country’s top LNG importer China National Offshore Oil Corp. suspended contracts with at least three suppliers, which drove spot LNG prices to a record low.

“PetroChina has done its best over the past month mitigating the virus impact and tried not to issue such a notice, including diverting cargos to India and Singapore,” the source said.

“But unlike CNOOC (which sent the notice earlier) which may see demand slowing recovering, PetroChina is grappling with a sharp seasonal demand fall from mid-March (for piped gas) when the heating season ends.”

By Chen Aizhu and Jessica Jaganathan