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PetroChina Boosts European LNG Activity with Yamal Cargoes

January 16, 2019

Photo courtesy of PetroChina

China's top oil and gas company PetroChina (PCCYF) is selling spot liquefied natural gas (LNG) cargoes on the European market from Russia's Yamal plant, adding to a flood of volumes to the continent amid subdued Asian demand, trade sources said.

PetroChina's increased presence in Europe is an example of how Asian energy companies are expanding their role as LNG traders, engaging in LNG transactions globally.

The early start-up of Yamal LNG's second and third trains, or production lines, in 2018 raised spot volumes from Russia and helped PetroChina boost its European market presence, selling LNG from its 20 percent share of the project’s spot volumes.

PetroChina has offered cargoes mainly to northwest Europe this winter, with buyers that include trading houses Vitol and Trafigura, as well as UK oil major BP, two sources said.

Regular volumes from Yamal ensure a more stable presence in Europe for PetroChina, the publicly traded arm of China National Petroleum Corp.

Last winter, PetroChina also traded some spot volumes from Yamal LNG Train 1. However, a spike in Yamal LNG production at the end of 2018 to 16.5 million tonnes per annum (mtpa) has allowed PetroChina to compete for high-profile buyers with another Yamal LNG shareholder, Novatek (NVTK.ME), and U.S. producers.

This winter has seen Europe become a prime destination for spot LNG cargoes, amid weak Asian demand and increased shipping costs to transport LNG between the Atlantic and Pacific basins.

Russia's Novatek has a 60 percent share of Yamal LNG spot cargoes and has been offering up to two cargoes a week to European buyers, a source close to the matter said.

PetroChina's sales are organised via tenders open to a limited number of participants, an LNG trader said, adding that the tenders are being held almost every week this winter.

France's Total, which also has a 20 percent share of Yamal spot LNG, has not been marketing the volumes, sources said.

With a low spread between European gas and Asian LNG prices, some traders and brokers expect PetroChina's spot volumes to stay in Europe for most of this year.

"There is still a very high interest (for spot LNG volumes in Europe), unlike last winter," an LNG buyer in Europe said.

PetroChina has a 20-year offtake deal from Yamal for 3 mpta, aimed at delivery in China only and expected to start this year.

That deal is part of a total 14.8 mtpa from Yamal LNG that is committed to Total, PetroChina, Russia's Gazprom, Spain's Naturgy and Novatek, Total's website says. 

(Reuters, Reporting by Ekaterina Kravtsova; Editing by Nina Chestney and Dale Hudson)

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