EXCLUSIVE-PetroChina suspends certain gas contracts while coronavirus hits sources of demand

By Chen Aizhu and Jessica Jaganathan

SINGAPORE, March 5 (Reuters) – PetroChina 601857.SS has suspended certain imports of natural gas, including on liquefied natural gas (LNG) shipments and on gas imported via pipelines, as a seasonal drop in demand adds to the impact on consumption of ; coronavirus epidemic.

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

PetroChina, China's largest gas producer and supplier, did not immediately respond to requests for comment.

A spokesperson for the state-owned KazTransGas, which handles gas exports, did not comment immediately, while Gazprom could not be contacted immediately.

A spokesperson for the Uzbek energy company Uzbekneftegaz made no immediate comments. The gas exporter from Turkmenistans Turkmenneftegaz could not be immediately contacted for comment.

A Turkmen government source said he was unaware of force majeure. If this is the case, we hope that this measure will be short term and will not affect the Turkmen-Chinese partnership in the long term, strategic and mutually beneficial in the gas sector.

China is one of the world's largest importers of gas and LNG, so any purchase cancellations are expected to have a big impact on prices, traders said.

Force majeure is a clause in contracts, which generally refers to unforeseen external circumstances which prevent a party to a contract from fulfilling its obligations.

PetroChina meets 40% of its total gas needs through imports and around 70% of imports are transported by pipeline from Central Asia, Myanmar and Russia, while the rest are by LNG, said one of the sources.

"The supply cuts will fall proportionally on the suppliers but the LNG suppliers will have a lesser impact compared to those on the piped gas," said one of the sources with direct knowledge of the situation.

It was not immediately known what volumes PetroChina had declared force majeure or the period covered by the opinion.

But a major LNG supplier to the Chinese company told Reuters that PetroChina had requested that certain cargoes be carried over to the third quarter.

For piped gas, PetroChina will likely request a reduction in daily appointments, said the first source.

PetroChina has long-term LNG import contracts with QatarGas, Gorgon LNG in Australia and the American firm Cheniere Energy LNG.A, An LNG plant in Papua New Guinea as well as an equity stake in the Russian Yamal project in the Arctic, where it transports cargo.

Sinopec in China 600028.SS It also supplies PetroChina during the coldest months from mid-November to mid-March as part of a state-mandated "interconnected" supply program.

The source said senior officials from PetroChina recently spoke on the phone with Qatar energy officials to explain the demand situation, during which Qatar has pledged to cooperate as much as possible.

"PetroChina has done its best in the past month to mitigate the impact of the virus, including by diverting cargo to India and Singapore, and has tried not to publish such a notice," said source.

"But unlike CNOOC (which sent an earlier notice) which could see demand slow down, PetroChina is facing a sharp drop in seasonal demand from mid-March (for piped gas) at the end of the heating season. "

Last month, the country's largest importer of LNG, China National Offshore Oil Corp (CNOOC), suspended contracts with at least three suppliers, causing LNG spot prices to drop to record levels. LNG-AS

"Demand is falling, especially from mid-March, as all boilers for heating will be turned off, while gas consumption by retail users like restaurants and hotels is still barely visible" , said an executive from one of the northern countries. Gas reception terminals based in China operated by PetroChina.

The director said that the operating rate of the regasification terminal in northern China, currently at 30 million cubic meters per day, would drop sharply in the second half of this month due to the drop in Requirement.

(Reporting by Chen Aizhu and Jessica Jaganathan; additional reporting by Muyu Xu in Beijing, Olzhas Auyov in Almaty and Marat Gurt in Ashgabat. Editing by Jane Merriman)

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