China flips to selling LNG export cargoes as pandemic curbs dent demand

LNG

China, the world’s largest LNG importer, has become a seller of LNG export cargoes as domestic demand wanes amid pandemic movement curbs in Shanghai and fears of similar restrictions being imposed elsewhere in the country as authorities move decisively to stem the spread of COVID-19.

“Except for the big three national oil companies – PetroChina, Sinopec and CNOOC– which have an obligation to ensure natural gas supply, others LNG importers were heard to have resold many of their LNG imports recently,” a trade source with an LNG terminal in south China told S&P Global Commodity Insights.

LNG terminals were still profiting from selling long-term LNG cargoes in the domestic market, but reselling LNG cargoes in the international market was proving more profitable, the source said.

A trade source with one of the top three state-owned oil majors said it was considering diverting some summer LNG supplies to other places where prices were higher.

“China’s demand for natural gas, especially for LNG, is expected to slow down this year,” he said.

This comes as an COVID-19 outbreak in Beijing has sparked fears of a Shanghai-style lockdown there. Mass testing for COVID-19 has also been ordered in several other major cities such as Hangzhou and Guangzhou, adding to concerns of further restrictions.

“Not only spot LNG cargoes, but also those term contract volumes with destination flexibility are expected to be resold to other places where prices are higher this year,” a third trade source said.

Dongguan Jovo, a privately-owned LNG terminal in southern Guangdong province, sold an LNG cargo to Italy on an FOB basis in the first quarter, the Shanghai Petroleum and Natural Gas Exchange reported April 16, citing a response from the Shanghai-listed company on an investors’ communication platform as part of its report.

The Singapore trading arm of CNOOC also closed a sell tender on April 27 for a cargo loading over July 10-12 from Australia’s Northwest Shelf. Award details could not be fully verified at the time of reporting.

LNG imports at many terminals have also been reduced, with some terminals in northern China receiving only one LNG cargo in two weeks, another source in Beijing said.

Dwindling LNG imports

China’s LNG imports fell 18% year on year and were down 4.8% month on month at 4.63 million mt in March, the lowest since April 2020, latest customs data showed April 20.

Daily trucked LNG loadings scheduled at China’s 21 LNG terminals totaled 826 trucks on April 15, down 26.9% from 1,130 trucks on April 1 and down more than half or 51.6% from 1,708 trucks on March 1, data from domestic energy information provider JLC showed.

China’s trucked LNG prices for coastal terminals and inland plants have dropped to below Yuan 8,000/mt ($1213.90/mt) since April 13, data from the Shanghai Petroleum and Natural Gas Exchange showed, which equates to $22/MMBtu and is close to the spot LNG price assessed in the North Asian market by S&P Global’s Platts JKM on April 26.

Less expensive domestically-produced natural gas and imported pipeline gas were expected to further squeeze the market share of imported LNG, sources said.

PetroChina’s Natural Gas Sales Western Branch offered 20 million cubic meters of pipeline gas for delivery over April 21-30 on the Chongqing Petroleum and Gas Exchange for auction last week. The transaction was settled at Yuan 4.4-4.42/cu m on April 19, which is equivalent to around Yuan 6,960-6,989/mt, or around $20/MMBtu, domestic energy information provider JLC said.

LNG plants that bought pipeline gas for processing into LNG in the country’s northwest sold at around Yuan 7,100-7,250/mt this week, much lower than the Yuan 7,600-8,600/mt offered by LNG terminals, according to market sources.

This comes as China continues to increase domestic production of natural gas, with output rising 6.6% year on year to 56.9 Bcm in Q1, National Bureau of Statistics data showed.

While China has said it has stopped releasing pipeline gas import data from 2022, its pipeline gas imports were estimated at around 10.54 million mt in Q1, up 7.1% on the year, according to S&P Global calculations based on the country’s total natural gas imports of 27.82 million mt and the LNG imports of 17.28 million mt seen in the quarter.

“Pipeline gas supply is ample recently,” another source in Guangdong province said, adding that this was also weighing on LNG imports.

Source: Platts

LEAVE A COMMENT

×

Comments are closed.