China powers up use of liquefied natural gas

Handling of energy resource, imports on rise amid move toward cleaner fuel in achieving green transition

China's demand for liquefied natural gas is expected to rise in 2023, and use of the super-chilled fuel is forecast to pick up as additional measures have helped the economy to recover, industry experts said.

LNG imports this year are likely to surpass 70 million metric tons, 11 percent higher year-on-year, according to strategic research provider BloombergNEF. That would signify that China's LNG demand is set to recover in 2023 as economic growth rises, it said.

Forecasts from analysts at European research firms Rystad Energy, Wood Mackenzie and Independent Commodity Intelligence Services put China's demand between 70 million and 72 million tons in 2023, 9 to 14 percent higher than in 2022.

The LNG trade is expected to increase robustly in the near term worldwide, with continuing demand in emerging markets as they grow and industrialize, according to the BP Energy Outlook 2023. Much of this growth is driven by increasing gas demand in China, India and other Asian nations as they move away from coal.

LNG imports are the main source for this growing use of natural gas, accounting for 65 to 75 percent of the increase in gas consumed in emerging Asian nations out to 2030, the BP outlook said.

China has become the dominant force in LNG worldwide as it works toward a green transition with what is seen as a relatively clean bridge fuel. Chinese buyers account for 40 percent of recent long-term LNG contracts among global players, according to Japan-based news provider Nikkei Asia.

Of the long-term import contracts China now has for LNG, the United States is responsible for around 25 million tons. Australia ranks second at roughly 17 million tons, while the Middle East supplies 14 million and Russia contributes about 6 million, it said.

China National Offshore Oil Corp was the nation's top importer of LNG last year with 26.69 million tons, accounting for around 43 percent of the country's total LNG imports.

China Petrochemical Corp, also known as Sinopec, the world's largest refiner by volume, reached a 27-year agreement with state-owned QatarEnergy late last year to buy 4 million tons of LNG annually beginning around 2026.

"State-owned enterprises have led China's expansion of its capacity to handle LNG, while private companies are playing an increasingly active role in building LNG terminals," said Li Ziyue, an analyst with BloombergNEF.

Private Chinese energy company ENN Group signed a contract last year with Texas, US-based Energy Transfer to buy 2.7 million tons of LNG annually for 20 years. ENN also increased its purchasing agreement with NextDecade, also headquartered in Texas, to buy 2 million tons a year for 20 years as well.

Over 2021 and 2022, China closed long-term LNG purchasing contracts worth nearly 50 million tons a year, tripling its purchases through long-term contracts in just two years, up from the annual volume of roughly 16 million tons from 2015 through 2020, according to Rystad Energy.

Industry experts said that China's demand for natural gas in 2022 appears to have fallen for the first time in two decades, due to weak demand from industries disrupted by pandemic controls.

While imports to China, the world's second-largest economy, were likely to have fallen short of record 2021 levels, growth momentum across sectors is expected to be restored with employees heading back to work, according to Rystad Energy.

Gas prices spiked last year due to the Russia-Ukraine conflict, which led Europe to import record amounts of LNG, pushing Asian spot prices for LNG to historic highs.

China was the world's top LNG importer in 2021, but Japan held that position last year.

China has also been ramping up construction of LNG infrastructure in recent years, including receiving terminals and storage facilities, from expansions to new facilities, as the country prioritizes a transition away from coal.

The total turnover capacity of LNG receiving stations in China reached 97.3 million tons per year by the end of 2022, according to the Economics and Technology Research Institute under China National Petroleum Corp.

CNOOC led with 28.6 million tons per year, accounting for 29.4 percent of the country's total capacity, followed by China Oil &Gas Piping Network Corp with 28.4 percent, CNPC with 13.7 percent and China Petrochemical Corp at 13.4 percent, it said.

China is among the countries with a long list of LNG terminals under construction, according to Anne-Sophie Corbeau, a researcher with the Center on Global Energy Policy at Columbia University, as quoted in the South China Morning Post. While some are being constructed from scratch, many existing terminals are undergoing expansion, she said.

Sinopec said that in addition to its two LNG terminals in Tianjin and Qingdao, the company is also building LNG terminals in Guangdong, Shandong and Zhejiang provinces and the Guangxi Zhuang autonomous region.

The company's natural gas supply capacity is expected to rise to 60 billion cubic meters per year by the end of this year, with the handling capacity of LNG to reach 26 million tons per year, equal to 36.2 billion cubic meters of natural gas, which means the supply of LNG will account for more than half of the company's total natural gas supply capacity, it said.

The company vows to further expand its LNG handling capacity to 40.3 million tons per year by the end of the 14th Five-Year Plan (2021-25) period.

CNOOC is also accelerating its LNG terminal construction. In addition to its 10 LNG terminals nationwide, the company plans to build two new ones in Jiangsu province and Zhangzhou, Fujian province. It plans to expand four receiving stations in Tianjin, Shanghai and Zhejiang and Fujian provinces, said Li Hui, deputy general manager of the company.

It also plans to build a sharing platform at LNG terminals to provide third parties with terminal services.

LNG has also become the first choice to replace fuel oil to power marine vessels as the International Maritime Organization increases limits on carbon emissions created by new ships. The use of LNG has shown it can reduce carbon emissions by nearly 25 percent, experts said.

CNOOC has recently started ship-to-ship refueling services for large LNG-powered ships berthing in domestic coastal ports, as part of its effort to boost the development of LNG-fueled ships.

zhengxin@chinadaily.com.cn