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Chinese government’s decision to switch the northeast regions of Tianjin and Hebei from coal to gas has seen the country’s LNG imports rise 42 percent in the first nine months of the year.
The natural gas demand in China is forecast to rise 10 percent this year, following a rise of 6.6 percent and 5.7 percent in 2016 and 2015, respectively, according to a report by the consultancy Poten & Partners.
The LNG imports rise was the result of a growing demand and due to spot LNG prices that were lower in comparison to the state-controlled city-gate gas prices during the summer. However, with spot prices reaching over $9 per mmBtu, Beijing Gas Group is likely cut on its spot LNG imports.
The positive margins encouraged state-owned operators CNOOC and PetroChina to buy more spot cargoes to meet demand and also build inventories ahead of the winter, the report cites industry sources.
China’s import capacity has been expanded and the utilization rate in the 12 months ending September 30 is estim<ted to be close to 55 percent, Poten data shows. The capacity is currently at 62 million mt per year and it could reach 70 million mt as four new terminals begin commissioning during 2018.
A number of small-scale liquefied natural gas terminals are set for expansion in the coming period to extend the handling capacity available to gas distributors that either have contracts in place with LNG export projects, or are looking secure volumes through tenders.
Half of the receiving capacity is operated by CNOOC with two new terminals to add another 4.6 million mt. The company’s imports in 2016 were at 16 million mt and it is expected that this year the figure will exceed 22 million mt in 2017.
The company’s long-term sale and purchase deal will reach its peak in 2020 with 22 million mt per year, which urged the company to secure more supply under one to three-year deals to complement its existing supply.
CNOOC is also in discussions to allow third-party access to its terminals at the beginning of next year.