Operators of China’s LNG import terminals are working hard to provide the infrastructure required to handle the country’s burgeoning gas purchases
The Chinese Government’s decision on 3 August 2018 to impose a 25% tariff on imports of US LNG, as part of the escalating, tit-for-tat trade war between the two superpowers, will probably have only a minor impact on China’s surging LNG import volumes.
China’s LNG imports in 2017 jumped 42.3% year-on-year, to 39.1M tonnes. The US provided only 1.4M tonnes of that total while Australia shipped 17.8M tonnes to China and Qatar 7.7M tonnes.
Although US LNG exports are set to increase fivefold over the next three years, from 12.2M tonnes in 2017 to around 65M tonnes in 2020, Chinese buyers have signed up for relatively little of this growing output.
Meanwhile, Novatek is ready to help meet China’s burgeoning demand for gas as it prepares to bring onstream the second and third liquefaction trains of its new Yamal LNG project in the Russian Arctic. In addition, the developers of the planned expansions of the Sakhalin 2 terminal in east Russia and the PNG LNG terminal in Papua New Guinea will be targeting Chinese buyers for much of their new LNG production.
CNOOC and the juggernaut
The Chinese LNG imports’ juggernaut continues to roll on, as the government’s programme of substituting coal with clean-burning natural gas in residential, commercial and industrial premises continues to gain ground. China’s H1 2018 LNG imports totalled 23.8M tonnes, a 50% jump on the same period a year earlier. Only Japan imports more LNG than China.
In early August 2018 China’s 20th LNG receiving terminal was commissioned. Known as Shenzhen Diefu LNG, the 4 mta facility is operated by China National Offshore Oil Corp (CNOOC) and is located in the Diefu district of Dapeng Bay, not far from CNOOC’s existing Dapeng LNG terminal.
China’s complement of receiving terminals features 15 large-scale LNG import facilities and five small-to-mid-scale coastal distribution installations.
Of the country’s 20 terminals, CNOOC operates 10, comprising nine large-scale LNG import facilities and one small-scale coastal distribution complex, the Fangchenggang distribution centre near the Vietnam border. The other CNOOC import terminals besides Shenzhen Diefu are located at Tianjin, Shanghai, Ningbo, Putian, Yuedong, Dapeng, Zhuhai and Hainan.
Of the remaining six Chinese large-scale LNG import facilities, Sinopec and PetroChina, the country’s other leading oil and gas companies, operate three each.
CNOOC reports that its nine import terminals can handle up to 33.8 mta of LNG, representing 56% of China’s receiving capacity and placing the company third among the world’s leading LNG importers.
Since Dapeng LNG, the country’s first import terminal, was commissioned in 2006, CNOOC has imported 120M tonnes of LNG. Dapeng has handled 50% of that traffic.
CNOOC has plans to further expand its LNG terminal network, with new facilities in Fujian, Jiangsu and Zhejiang provinces planned. In May 2018 the energy company gave the green light to a project to build its 10th major import terminal, at Longhai City near Zhangzhou in Fujian province. The 3 mta facility, with three 160,00-m3 storage tanks, is due for completion in late 2021.
Also in May 2018, CNOOC decided to augment its existing Tianjin installation in northern China by constructing six 220,000-m3 storage tanks and providing additional regasification equipment. When the project is complete in 2022, CNOOC’s Tianjin terminal will be able to process 7.25 mta of LNG, up from an expected 3.2 mta this year.
In another expansion project, announced earlier in 2018, CNOOC was given clearance to press ahead with constructing two new 200,000-m3 storage tanks and additional road tanker loading bays at its Shanghai terminal. The opportunity was grabbed and the company gave the green light to a scheme that will double the facility’s throughput capacity, from 3 to 6 mta, by 2020.
Sinopec’s solid base
Sinopec’s most well-known LNG sales and purchase contact is with Australia Pacific LNG (APLNG) for 7.6 mta for 20 years from the latter’s liquefaction plant in the Australian east coast port of Gladstone. Sinopec has also signed up for 2 mta of LNG for 20 years from the PNG LNG terminal in Port Moresby on Papua New Guinea’s southern coast.
The APLNG and PNG LNG volumes dominate the cargo flows into the Sinopec import terminals at Qingdao, Tianjin and Beihai, all of which have a 3 mta LNG reception capacity. The Qingdao facility opened in December 2014, Beihai in April 2016 and Tianjin in February 2018.
The Sinopec purchases of APLNG cargoes are a mix of free-on-board (FOB) and delivered-ex-ship consignments. To cover the FOB shipments, Sinopec, in tandem with Mitsui OSK Lines and China COSCO Shipping, has had a series of six 174,000-m3 LNG carriers built at the Hudong-Zhonghua yard in China. The last of the sextet, Cesi Lianyungang, was commissioned in May 2018.
In August 2018 Sinopec received approval to proceed with its planned expansion of the Qingdao terminal. The US$335M expansion project, which will involve constructing two 160,000-m3 storage tanks, will boost the facility’s throughput capacity from 3 to 7 mta.
Construction work on a fourth Sinopec import terminal, the 3-mta Wenzhou facility in Zhejiang province, is nearing completion and a late 2018 start to operations is planned. With Wenzhou, and expansions of all three of its three existing terminals in the offing, Sinopec is gearing up for a significant increase in its LNG import capacity, from 9 mta currently to 26 mta by 2023.
PetroChina is similarly engaged in projects to boost its LNG receiving capacity, including with expansion work at its Rudong, Tangshan and Dalian import terminals. Affiliate company Kunlun Energy manages PetroChina’s LNG import facilities.
When a new 200,000-m3 storage tank and additional regasification facilities were commissioned at Rudong in November 2016, LNG throughput capacity was increased from 3.5 to 6.5 mta. Rudong received 57 shipments and 4.4M tonnes of LNG in 2017. Dalian has similarly had its import capacity increased, from 3 to 6 mta, by constructing additional facilities, including a new storage tank.
The Tangshan installation, a main provider of gas for Beijing, is also being expanded. Four new 160,000-m3 storage tanks are currently being constructed, which will double storage capacity at the terminal to 1.28M m3 by the end of 2019.
PetroChina reports that LNG throughput in 2017 at Tangshan, Rudong and Dalian was 95% ahead of the previous year’s figure. In March 2018 Dalian announced it had received 10M tonnes of LNG since opening in November 2011.
PetroChina is also weighing up the feasibility of constructing eight additional LNG import terminals by 2030, in Shandong, Liaoning, Guangdong and Fujian provinces. An initial spur for additional import capacity was the possibility of building up purchases of the new US LNG export volumes about to come onstream.
While the new 25% import tariffs on US LNG imports might decrease the attractiveness of such purchases, closer links between US gas sellers and Chinese gas buyers might help overcome the trade imbroglio the two countries are sinking into.