Indonesia's PGN puts Sinopec LNG deal on hold due to coronavirus outbreak

Jakarta — Indonesia's Perusahaan Gas Negara has frozen a LNG supply deal with China's Sinopec due to the coronavirus outbreak, with the first cargo expected to be delayed by almost four months until April, company director Gigih Prakoso told S&P Global Platts on Tuesday.

Prakoso, however, said that the impact has only been on the scheduling of cargoes.

The delays come on the heels of Chinese LNG importers facing declines in downstream gas demand as the coronavirus outbreak has shut down large parts of big cities and manufacturing hubs, putting suppliers in a bind.

PGN had signed a deal with China's state-run Sinopec for LNG supply for at least six LNG cargoes a year, with the first shipment expected to start by early-January 2020.

Prakoso said PGN will still export LNG to China, but did not say whether Sinopec had issued any force majeure notifications to PGN.

The Sinopec deal was key to PGN's move towards becoming a global LNG player, following the government's decision to merge PGN with state-owned oil and gas company Pertamina.

Pertamina has assigned PGN to manage its LNG business and integrate Indonesia's midstream and downstream gas businesses.

PGN plans to expand LNG exports, especially to Asian buyers, and expects to export two cargoes to Europe this year, while China is expected to import 6-7 cargoes a year, starting from this year, Prakoso said.

"Pertamina-PGN will optimize our LNG portfolio to the international market," he said, adding that PGN has planned $500-$700 million of capital expenditure this year compared with $225 million in 2019, including its spend on the LNG, pipeline and upstream businesses.