French oil major Total has refused to accept a force majeure notice from one of its long-term buyers of liquefied natural gas (LNG) in China, related to the coronavirus outbreak in the Asian country.
Philippe Sauquet, Total’s head of Gas, Renewables and Power business, told reporters Thursday “some Chinese customers, at least one, are trying to use the coronavirus to say I have force majeure,” because of the epidemic spreading across the country, which has virtually forced a countrywide lockdown.
“We have received one force majeure that we have rejected,” Sauquet said, without naming the company. “There’s a strong temptation from some long-term customers to try to play with the force majeure concept. To say 'I cannot take my cargo under the long-term contract, but I would like to buy spot' is contradictory.”
Total said last week its LNG sales increase 57% in 2019, while prices dropped 44% in Asia. Spot prices are currently half of long-term contracts, driven by mild demand and an oversupply in the market.
Citing unnamed sources, Reuters reported last week China’s CNOOC declared force majeure on some prompt deliveries with at least three suppliers. Bloomberg said people familiar with the matter said the notice was sent to suppliers, including Shell and Total.
The companies have declined to comment on the matter.
The Chinese government has been issuing force majeure notices mostly to exporters who have been affected by the lockdown of people and goods in the country. It’s unclear whether such contractual clauses have legal ground in this circumstance.
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