Sign Up for FREE Daily Energy News
  • Stay Connected
  • linkedin
  • twitter
  • facebook
  • youtube2

Hazloc Heaters
Copper Tip Energy Services
Copper Tip Energy
Hazloc Heaters

COLUMN-China still wants LNG this winter, but not every last drop: Russell

English Español 简体中文 हिन्दी Português
These translations are done via Google Translate

(The opinions expressed here are those of the author, a columnist for Reuters.)

* GRAPHIC: China LNG imports vs spot price:

By Clyde Russell

LAUNCESTON, Australia, Nov 13 (Reuters) – The liquefied natural gas (LNG) market in Asia appears to be coming to terms with the likelihood that China will still buy robust volumes over winter, but not quite at the rate it did last year.

In the winter of 2017-18 China’s unrestrained appetite for the super-chilled fuel drove spot prices LNG-AS to what was then a three-year high, upending a market that had previously believed a supply surplus was looming.

However, this time around China appears to be managing its winter demand in a more orderly fashion. That means while it will still likely increase cargoes in the coming months, it won’t be trying to suck every available drop of LNG from the market.

Having been caught short of natural gas last winter, China has taken steps to ensure that the coming winter will see adequate supplies. It has boosted storage facilities and domestic output, while maximising use of pipelines from Asia and LNG terminals are being maximised.

China has expanded use of natural gas in winter, primarily for heating as part of its policy of burning less coal in order to improve air quality.

Domestic natural gas production rose 6.2 percent to 116.17 billion cubic metres (bcm), equivalent to about 86 million tonnes of LNG, in the first nine months of the year compared with the same period last year, according to official data.

Natural gas imports from both LNG and pipelines were up 33 percent in the first 10 months of the year to 72.06 million tonnes.

State-controlled oil and gas major Sinopec said on Monday that it will boost its supply of natural gas for the heating season by 18 percent from last winter to 18.17 bcm, and that its three LNG receiving terminals are fully booked for December and January.

PetroChina, another state-controlled oil and gas major, said on Monday that the Central Asia-China pipeline will operate at 100 percent capacity this winter and supply a record 160 million cubic metres of natural gas per day.



The separate announcements on the same day by China’s two largest oil and gas companies is an illustration that Beijing is determined that this winter won’t see a repeat of last year’s supply crunch and price spike.

So far, the market seems to be in agreement, with the spot price actually weakening from late September to early November, a period when it has started rising in past years.

Spot cargoes for December were assessed last week at $10.30 per million British thermal units (mmBtu), up 10 cents from the prior week and the first gain in six weeks.

The decline in spot LNG prices over the past two months, and the tentative move higher last week, contrast with the 90 percent surge in prices last year between late August and the peak of $11.50 per mmBtu, reached in the week to Jan. 12.

Some Chinese LNG buyers have scaled back their winter purchase plans and are re-selling cargoes in the spot market, Wen Wang, a senior consultant at Wood Mackenzie said in a note on Monday.

“Industrial coal-to-gas switching in the second half of 2018 could fall short of expectations, reflected by weak domestic LNG prices,” the consultant said. “Policy signals also suggest that winter coal-to-gas switching in the heating sector could be moderate compared to last year.”

China did boost LNG imports in October from September, according to vessel-tracking and port data compiled by Refinitiv.

Imports were 4.49 million tonnes in October, up from 3.97 million in September but down from August’s 4.52 million.

For November, the shipping data suggest that imports will be at least 3.7 million tonnes – although that figure can still rise as more vessels depart for China from Asian and Australian producers.

The overall message is that while China is still the key growth market for LNG, it’s unlikely to exert the same influence on prices this winter as it did last year.

Editing by Kenneth Maxwell

Share This:

More News Articles