China

Domestic production in China has not been able to keep up with demand growth, which is why imports have been playing a more important role in recent years. Domestic production decreased from 80% to 57% of total supply between 2011 and 2018, and is expected to account for 54% by 2024.

China’s LNG imports have grown strongly since the country’s first regasification terminal (Guangdong Dapeng) was commissioned in 2006. LNG imports reached almost 74 bcm in 2018 (42% year-on-year [y-o-y] increase).

China is a growing contributor to LNG trade development: in 2014 the country accounted for 20% of the total increase in LNG imports, then 43% in 2017 and 55% in 2018 (or 21.5 bcm out of a global increase of 39.6 bcm).

As shown on Figure 3.3, China’s annual LNG import growth has been greater than any other importer since 2016. While global LNG trade increased by 10% in 2018, China’s growth reached 42%. Korea also experienced a strong increase of 17% y-o-y growth, reaching 60 bcm during 2018.

Figure 3.3 LNG imports y-o-y growth and incremental growth, 2014–18

Source: ICIS (2019), ICIS LNG Edge, https://lngedge.icis.com (subscription required).

In 2018 China accounted for 55% of global LNG trade growth.

In 2018 China became the foremost natural gas importer, with 124 bcm of LNG and pipeline imports, surpassing Japan (113 bcm, 1% y-o-y growth). It accounted for 17% of total LNG imports, second to Japan (26%) and ahead of Korea (14%). LNG imports represented 73% of the country’s total increase in imports. The largest increment came from Australia (8.5 bcm), followed by Malaysia (2.3 bcm) and Qatar (2 bcm). The United States supplied almost 1 bcm more than in 2017 (Figure 3.4).

Figure 3.4 LNG trade increment by origin, China, 2017–18

Source: ICIS (2019), ICIS LNG Edge, https://lngedge.icis.com (subscription required).

Australia accounted for 40% of additional LNG volumes imported by China in 2018, mainly via longterm contracts.

LNG infrastructure

At the end of 2018, China had 19 LNG import terminals for a total nameplate regasification capacity of 92.8 bcm/y. Almost half of China’s incremental LNG imports (46% of the almost 22 additional bcm imported by China in 2018) arrived at North Coast terminals, with 39% at terminals on the East Central and 15% on the South Coast. Utilisation rates at terminals in the North (117%)3 and East Central (129%) remain much higher than in the South (48%) due to pipeline capacity limitations affecting the movement of natural gas from the south to the north of the country.

State-owned companies took several measures to improve interconnection and flexibility in 2018 in order to avoid another winter supply shortage:

China National Offshore Oil Corporation (CNOOC), the largest LNG regasification operator, used its terminals in the South (Zhuhai and Diefu) to inject gas into the China National Petroleum Corporation (CNPC) pipeline to the north of Guangdong, thus enabling CNPC to allocate those volumes to the north of China. It also started to provide third-party access to its terminals in Guangdong and Zhejiang during the second half of 2018.

In November 2018 CNOOC launched a trial project to deliver surplus capacity from the Yangpu terminal (Hainan) to the port of Jinzhou in Liaoning (North China). Some 130 LNG tanks of 25 000 cubic metres (m3) each were transported on a container feeder ship.

CNOOC also leased a floating storage and regasification unit (FSRU), capable of storing 150 000 m3 of LNG for the winter season, as an emergency source of supply. The vessel was eventually not needed and the lease was terminated in January 2019.

Sinopec reinforced its pipeline infrastructure with the commissioning of the first phase of the Erdos–Anping–Cangzhou pipeline – linking its Tianjin terminal to Hebei and Henan

provinces. The company also prepared for emergency winter supply needs by renting a fleet of 2 600 trucks to deliver LNG from the south to the north.

Some 14.3 billion cubic metres per year (bcm/y) of new regasification capacity was commissioned in 2018, in Tianjin Nangang (4.1 bcm/y), Shenzhen Diefu (5.4 bcm/y), Zhoushan (4.1 bcm/y) and Qidong (0.7 bcm/y). In January 2019 CNOOC’s Fangchenggang offshore terminal located in Guangxi started operations with a designated transhipment capacity of 0.8 bcm/y. CNOOC has also started to use LNG iso-containers to export from its Hainan terminal (Argus, 2019a).

A total of 32.5 bcm/y of additional regasification capacity is currently under construction and scheduled to start operations between 2019 and 2022. Some 8.2 bcm/y are expected to be added in 2019, from the new Chaozhou (4 bcm/y) and Jiangyin (2.7bcm/y) LNG terminals, as well as from the expansion of the Fujian LNG terminal (1.5 bcm/y).

LNG supply

LNG spot4 imports increased by 75% in 2018, from 10 bcm to 18 bcm (Figure 3.5), reaching 24% of total LNG imports. National oil companies (NOCs) accounted for 93% of total spot imports, with CNOOC representing 42%, Petrochina 40% and Sinopec 11%. Spot procurement decreased during the first quarter (Q1) of 2019 compared to the fourth quarter (Q4) of 2018, yet doubled from their Q1 2018 level.

Figure 3.5 LNG imports by type of contract, China, 2016–18

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8

6

4

2

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Source: ICIS (2019), ICIS LNG Edge, https://lngedge.icis.com (subscription required).

Spot contracts are gaining momentum, representing 24% of China’s total LNG supply in 2018.

In addition to this growth in spot volumes, Chinese buyers signed several new mediumto longterm contracts in 2018 and early 2019 to further increase and diversify the country’s LNG supply (Table 3.1). Aside from the 4.6 bcm/y contract signed with Qatargas in September 2018, these contracts have relatively limited volumes (ranging from 0.6 to 1.6 bcm/y).

Gas Market Report 2019 3. Trade

* Extension from the original 15 -year contract for 1.36 bcm/y.

This forecast expects LNG imports to grow at an annual average rate of 7% over the forecast period to reach 109 bcm by 2024, with China becoming the world’s largest LNG importer.

Pipeline imports and infrastructure

During 2018 China imported 50 bcm by pipeline, or a 19% increase compared to 2017. China imported around 47 bcm from Caspian countries (up 23% on 2017, mainly driven by Kazakhstan), while imports from Myanmar totalled 3 bcm.

CNPC announced in late 2018 that due to strong demand from downstream users, the daily gas transmission volumes from the Central Asian pipeline would reach 160 million cubic metres per day (mcm/d) during the winter season, representing 100% capacity (CNPC, 2018). Additionally, CNPC completed the second development phase of Turkmenistan’s Samandepe gas field and added a new compressor station, boosting production capacity by 2.34 bcm/y (Argus, 2018a).

CNPC and Kazakh state-owned company KazMunaiGaz signed a one-year supply contract for 5 bcm in October 2017, which started delivering in October 2018 through Line C of the Central Asia–China system. Exports from Kazakhstan are scheduled to double to 10 bcm/y from 2019, under the contract signed between Petrochina and Kaztransgaz in October 2017. Kaztransgaz plans to build three additional compressor stations on its Beyneu–Bozoi–Chimkent route, lifting the pipeline capacity from 5 to 15 bcm/y (Argus, 2018b).