Total to cancel, defer summer LNG cargoes

Total plans to cancel or defer some LNG cargoes in the second and third quarters amid weakened demand and low global prices.

The firm is considering cancelling some LNG cargoes in the summer in order to limit losses, chief executive Patrick Pouyanne said today. Total also anticipates deferrals of some LNG cargoes in the second and third quarters because of lower demand as a result of the "global economic slowdown" caused by the Covid-19 outbreak, the firm said.

Total holds offtake agreements from the Sabine Pass and Cameron LNG facilities for an aggregate volume of 6.5mn t/yr.

The company expects the current low oil prices to "negatively impact" its LNG business more significantly in the second half of the year, as most of the firm's contracts are oil-indexed with a six-month indexation period, Pouyanne said.

Earlier this year, Total rejected a Chinese LNG buyer's request to declare force majeure following the virus, the firm said in February, with some Chinese buyers possibly trying "to play" with force majeure to turn down cargoes under long-term contracts and buy on the spot market instead, it added.

Total has also planned to cut upstream oil and gas production by 5pc from previous 2020 forecasts to 2.95mn-3mn b/d of oil equivalent (boe/d). The firm did not specify which assets would reduce production.

The firm recorded a rise in LNG sales to 9.8mn t of LNG in the first quarter, up from 7.7mn t a year earlier, with total gas production for LNG increasing to 2.61bn ft³/d (73mn m³/d) from 2.46bn ft³/d (69mn m³/d) a year earlier. The increase in LNG sales was largely driven by ramp-ups at the Novatek-operated Yamal LNG in Russia, in which Total holds a 20pc stake, and the Inpex-operated Ichthys terminal in Australia, in which it holds a 26pc stake, and the start-up of the second train at Sempra's Cameron LNG in the US, in which it has a 16.6pc stake, Total said.

The firm is still expecting to move forward with the Energia Costa Azul (ECA) liquefaction project in Mexico "in the coming months", as its location on the country's Pacific coast provides a strategic advantage by reducing shipping costs to Asia by about $1/mn Btu, Pouyanne said. But the firm does not consider it a priority to invest more in US merchant projects in the current market environment, he added.

Total has secured 1.7mn t/yr offtake from the 2.5mn t/yr ECA LNG project, which is being developed by US firm Sempra Energy. The project is on track to complete funding this quarter, Sempra said earlier this week.

By Ellie Holbrook