OMV CEO sees more LNG into Europe on coronavirus, 'not optimistic' on price

London — The head of Austria's OMV said Thursday he expected more LNG supplies into Europe in the near future as cargoes are diverted away from China due to the coronavirus outbreak in the country.

Rainer Seele, speaking after OMV released its Q4 earnings, said he was "not very optimistic" on gas prices, warning that in 2020 the average realized gas price was expected to be lower than the average Eur11.90/MWh last year.

"Because of the coronavirus outbreak, we do see more LNG cargoes landing in Europe impacting the hub prices, especially in northwestern Europe," Seele said.

"And that's the reason I think we need to have stronger demand to absorb the additional volumes coming from China or we need to have a super medicine [to bring] the infection rate of the coronavirus down," he said.

The coronavirus has sparked fears of a major economic slowdown in China, the world's second-largest LNG importer behind Japan, where quarantines and travel restrictions have caused a demand contraction.

China's state-owned CNOOC has declared force majeure on LNG contracts, a source close to company said Thursday, as the country's largest LNG importer tackles disruptions in downstream markets.

Europe acted as a sink for surplus LNG cargoes over much of 2019 given its liquid trading hubs and plentiful LNG import capacity.

OMV's Seele said the mild winter had been bearish for gas prices.

"I need to have an ice blizzard to talk about better gas prices," he said.

OMV produced a total of 505,000 b/d of oil equivalent in Q4, the first time the company had produced above 500,000 boe/d in a quarter.

CFO Reinhard Florey said the company expected average production in 2020 of some 500,000 boe/d given uncertainties over its Libyan oil production.

Romanian ambition

Production by its Romanian subsidiary OMV Petrom dropped by 3% to 152,000 boe/d in Q4.

OMV Petrom also holds a 50% stake in the planned Neptun project offshore Romania, where it is partnered with operator ExxonMobil, but has no plans to buy out the US major.

ExxonMobil confirmed late last year it was testing market interest for a sale of its 50% operated stake in Neptun, with a host of companies thought to be interested including Russia's Lukoil, Poland's PGNiG, Romania's Romgaz and others.

"I can assure you that we will not take over the 50% from ExxonMobil," Florey said. ExxonMobil, he said, would decide how to test the market.

The development of Neptun had been hanging in the balance amid speculation that ExxonMobil was planning to walk away from the project because of changes in Romania's gas legislation that could make the project uneconomic.

Florey said OMV hoped a new regulations would be approved by the government in the first quarter. "Right now, we have to put a question mark on this topic because there is no government," he said.

Nonetheless, OMV still believes a start-up date for Neptun of end-2024 was "feasible and realistic," he said.

"But we would need government approval as soon as possible," he said.