In the past several years, China’s LNG industry advanced at an unstoppable pace. The five-year average growth rate of the domestic LNG production capacity is 36% and that of the LNG import is 15%. The domestic production reached 10.1 million tons in 2017, up 28% from 2016, and that of import reached 38.3 million tons, up 43% from 2016. By those two simple numbers, China’s LNG industry again shocked the world with its “China Speed”.
When looking at China’s energy policies, President Xi reiterated his ambition on the environmental protection and air pollution treatment. Therefore, it is seemingly solid for the coal-to-gas reform to proceed continuously in 2018. In conclusion, from the policy fundamental, the motive of the LNG powerhouse still exists, and China’s LNG industry will maintain a remarkable growth accordingly.
Regarding the LNG imports, two new terminals will be put into operation in 2018: Sinopec Tianjin Terminal and ENN Zhoushan Terminal, with a total receiving capacity at 6 million tons per annum or an 11.6% growth rate in 2018.
Meanwhile, China’s oil and gas giants (CNOOC, Sinopec and CNPC) prefer the spot resources rather than long-term resources, while the non-SOEs are more active in the overseas market for spot hunting. Thus, from both the capacity and the motivation, China is likely to embrace a promising import growth rate in 2018 just like it did in the past several years.
China’s general terminal utilization rate hit 74% in 2017, nearly 20% higher than that in 2016, and it will be hard to further increase in practice. Therefore, the growth rate of China’s LNG import will still remain high in 2018, but the pace will slow down. It is estimated that the annual growth rate will be around 15%, and the import volume will only approach 44 million tons in 2018, despite a potential demand for over 50 million tons of imports.
Finally, when considering the domestic LNG production, China’s over-capacity issue will be exacerbated due to the rise of the unconventional gas liquefaction industry. As a matter of fact, nearly all the newly built or proposed LNG plants are unconventional gas-based, including:
The unconventional gas-based LNG production has great cost advantages, and the profitability is acceptable, even under the over-capacity and low-price background.
All in all, China’s LNG consumption pattern is more policy-oriented than the market itself, and the natural gas pipeline also drew great influence on the domestically produced resources and imported resources both. Together with the dominant positions of state-owned enterprises in the LNG terminals, China’s LNG market will continue to compromise with the government and gas giants for the residential and peak-shaving purpose. Comprehensively considering the ambitious policy, tremendous demand, ceiling-touched import and bearish production, China’s LNG industry will definitely further develop in 2018:
Overal, the LNG sales of the imported resources will reach 10 Mtpa, while the rest will be regasified into pipeline, thus, China’s LNG industry will embrace a promising future but maybe without many shocks.
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