Record China LNG demand

China’s imports of LNG are growing at a record pace as it aims to use cleaner fuels in an attempt to reduce city smog. (See also 'China promotes alternative fuel vehicles').

According to customs data, LNG imports are up 35% to 5.62 million t in the first quarter of 2014, compared to the same time last year. January imports were 77% higher than year ago figures, at 2.65 million t.

Thomson Reuters Point Carbon has reported 25% growth annual over the past four years. Research Firm Energy Aspects anticipates that imports are set to rise by a further third this year. Meanwhile, the National Energy Agency holds that gas demand will rise approximately 14.5%in 2014, to 193 million m³. By the end of this decade, China could overtake South Korea to become the world’s second biggest LNG buyer, behind Japan.

Gavin Thompson, Head of Asia Pacific gas and power at consultancy Wood Mackenzie, said: “Producers are certainly looking to China, because it’s the only market right now that will offer 2 – 3 million t deals”. The consultancy forecasts China’s imports to rise to 61 million t in 2020, from 18 million t last year, led by supply from Australia.

Supply competition

Japan and South Korea have also increased LNG consumption to replace lost nuclear power.

China’s state energy companies are competing for supply by securing equity stakes in projects across the globe. Malaysian firm Petronas announced in April that it will sell a 15% stake in its US$ 11 billion LNG export terminal on Canada’s Pacific Coast to China’s Sinopec Group and state-owned power group Huadian Corp.

Import capacity will rise from 31 million tpy at nine terminals to over 18 million t by 2018, when another 15 terminals are approved or begin operations. In February, Wang Ruiqi, a gas analyst with ICIS-C1 Energy commented that new terminals that have started up recently have led to more imports.

13 further terminals are either planned or proposed and capacity could reach over 110 million t by the beginning of the next decade. As a point of comparison, Japan imported 87 million t of LNG last year.

Demand growth limitations

Price considerations

According to Reuters, consistently high LNG prices in Asia since the Fukushima disaster could inhibit demand growth in China, as the country remains more price sensitive than Japan and South Korea.

However, Asian prices are expected to fall as a new wave of Australian supply comes to market over the next 3 – 4 years.

Domestic resources

China’s import needs will also depend on the extent to which domestic resources are exploited. China is believed to hold the world’s largest supply of shale gas.

David Caroll, vice president of the International Gas Union, commented: “Whether or not China develops its own natural gas production can make a huge swing in global demand”.

Edited from various sources by Emma McAleavey.

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