Russia's Lukoil Suspends Uzbek Gas Exports to China Due to Weak Demand

MOSCOW (Reuters) — Russia's second-biggest oil producer Lukoil has suspended gas exports to China from its projects in Uzbekistan, a company official told a conference call on Friday, due to weak demand.

Blocked from exporting gas from Russia, Lukoil has been betting on its gas projects in neighboring Uzbekistan, where it has invested as much as $10 billion in the hope of making returns from exports to China.

But the COVID-19 pandemic has hit both demand and gas prices, making liquefied natural gas (LNG) cheaper than gas exported via pipelines, where prices are often fixed.

As a result, Lukoil has had to suspend gas exports from its projects in Uzbekistan to China and re-direct as much as 5 billion cubic meters of gas to the domestic Uzbek market, Pavel Zhdanov, vice-president at Lukoil, told the conference call.

"Everything depends on when the demand will start to recover," he said. "LNG became cheaper than the pipeline gas, including from Uzbekistan, and we hope that it will again become the opposite at some point." 

Zhdanov did not forecast when that might happen but said there were signs of demand recovering in China, the world's top energy consumer, and his company was continuing talks to resume supplies.

Lukoil is barred from exporting the gas it produces in Russia. It sells the bulk of it to state gas company Gazprom, which exports it.

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