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Coronavirus may delay launch of new LNG facilities in Russia as Asia’s prices showed a phenomenal drop

Under the country's gas industry development plan by 2025, with vision to 2035, Vietnam plans to have six LNG terminals. Photo by Shutterstock. Sketched by the Pan Pacific Agency.

MOSCOW, Mar 23, 2020, TASS. The coronavirus pandemic is the most important uncertainty of 2020, it might delay the launch of new gas liquefaction facilities in anticipation of stabilization of markets, Head of the Contract Structuring and Pricing Directorate of Gazprom Export Sergey Komlev said in an article for Gazprom’s corporate magazine, TASS reported.

“Spot LNG prices in Asia showed a phenomenal drop to levels even below European … Such a deep drop is caused by an extraordinary situation with the spread of coronavirus, which is why LNG imports in China decreased in January-February for the first time in a long period. This factor, of course, is the most important uncertainty of 2020, making any attempt at forecasts futile,” he said.

At the same time, according to him, the European market against this background has not yet encountered an increase in LNG volumes redirected from Asia. Thus, shipments of regasified LNG to European gas networks in the first two months of 2020 are below the record values of the end of 2019 by about 20%.

“The fact is that in the current low price environment, it is easier for owners of LNG batches to get rid of it at any price than to pay for transport around the entire continent … The current price level creates a situation where even the operating costs of LNG delivery can hardly be covered,” Komlev said.

Against this background, according to Kolmev, LNG producers have an incentive to postpone the launch of new capacities as much as possible, waiting for at least some stabilization of the markets.

Speaking about forecasts for the current year as a whole, Komlev noted that from the point of view of the buyer, 2020 could be another successful year amid falling gas prices, however, the situation is not that favourable for the exporters.

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