LNG liquefaction sector may face FID postponement amid COVID-19
BAKU, Azerbaijan, May 13
By Leman Zeynalova – Trend:
The liquefied natural gas (LNG) liquefaction sector may face postponement in final investment decisions amid COVID-19 outbreak, Trend reports citing GlobalData, a leading data and analytics company.
Soorya Tejomoortula, Oil and Gas Analyst at GlobalData, noted that the structural shift of LNG buyers favoring short-term contracts with smaller volumes can increase the risk of FID delays and project cancellations. “LNG developers typically rely on long-term contracts to secure financing for their projects.”
The analyst pointed out that already a couple of LNG developers have announced construction delays due to the impact of COVID-19.
“The LNG Canada project is likely to be delayed as construction personnel at the project site in Kitimat has been reduced by half to deal with possible spread of COVID-19. Pacific Oil & Gas also announced that Woodfibre LNG project construction in Canada is likely to be extended by one year mainly due to delay in arrival of components from Asia,” Tejomoortula explained.
She went on to add that the instances of Royal Dutch Shell withdrawing from the Lake Charles II project in the US, and Woodside Petroleum delaying Train 2 of Pluto LNG project in Australia indicates the current crisis situation has serious ramifications on the upcoming liquefaction projects.
The LNG liquefaction sector is reeling under the pressure of falling oil and gas prices, weak LNG demand and poor global economic outlook.
The global LNG sector was already witnessing an LNG supply glut and weak demand before the outbreak of COVID-19. The fall in gas prices and further weakening of LNG demand after the COVID-19 outbreak has accelerated this trend.
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