Moves to open the domestic energy market and growing demand for natural gas are prompting smaller Chinese players to invest in LNG storage and regasification ventures and to source their own supplies.
The trend highlights China’s emergence as one of the fastest-growing LNG-import markets, as Beijing moves to clean up its cities and inland waterways and has been taking advantage of falling Asian LNG spot prices. China is planning to launch three emission-control areas, set to boost demand for LNG as marine fuel.
A recent report by Poten & Partners has highlighted how smaller players are driving LNG demand in China. Zhejiang Provincial Energy Group (ZPEG) is looking to buy 1 million tonnes a year (mta) of LNG for 20 years from 2020.
Zhejiang Province’s largest power producer buys gas imported as LNG from Ningbo terminal, from state-owned operator CNOOC, which has a long-term 2 mta supply contract with Qatargas. ZPEG now plans to invest in new capacity at Ningbo but also plans to invest in additional capacity at Sinopec’s planned LNG-import terminal at Wenzhou, for supply security.
“Zhejiang Provincial Energy now owns a 29% stake in the planned Wenzhou LNG terminal, but wants a 51% stake. Sinopec has yet to build the Wenzhou terminal, but has secured government approval for the project,” Poten reports.
“If talks with CNOOC and Sinopec fail, the provincial company plans to build a new terminal further south… in Taizhou. The project is under the planning stage in the 13th five-year plan, 2016-2020.”
Meanwhile, Hong Kong-listed ENN Group is planning to build a terminal at Zhoushan in Zhejiang province. ENN is positioning the 3 mta terminal as an LNG-bunkering hub, home port to an 8,000 mł LNG bunker-supply ship.
Poten also highlights growth in Chinese small-scale LNG demand. City gas distributor Xinjiang Guanghui has turned to spot cargoes, sourcing its first shipment, taking delivery of a 60,000-tonne cargo from Trafigura in early June and seeking a second partial cargo.
Because Guanghui has no pipeline access, it is taking delivery of these shipments by truck. Xinjiang Guanghui is building a Yuan450M (US$67M) terminal in Jiangsu Province and plans to build a second south of Shanghai in Zhoushan.
Chinese independents are well-placed to tap the country’s growing appetite for gas, being smaller and more flexible than the state-owned energy giants that have so far dominated this trade.
That said, their ability to build the infrastructure to tap that demand will rest on these independents’ appeal to prospective investors.