US LNG exports to China to surge

Cheniere Energy's Sabine Pass LNG terminal. Image: Cheniere Energy

US LNG deliveries to China have surged in the last few months as low prices have encouraged buyers to switch from coal, according to a report by US-China Economic and Security Review Commission released October 5.

The US exported $139 million worth of LNG to China in the first seven months of 2017. These figures already surpassed the 2016 total exports by 2%, according to the report.

Asian LNG prices are their lowest in more than a decade, making the cost premium of purchasing LNG instead of coal the lowest since 2000, the report said. Transport costs are also low.

In the past few years, Beijing adopted many policies targeted at curbing coal output, reducing coal power generation, and promoting natural gas consumption. It wants to increase the share of gas in the energy mix from the targeted 10% by 2020 to 15% by 2030.

Today, natural gas plays a small but growing role in China’s energy sector. According to China’s National Bureau of Statistics, natural gas consumption and production have both increased steadily over the past decade, with a supply gap widening substantially since 2009. In the first half of 2017, natural gas consumption soared 15% year-on-year to 115 billion cubic metres. This growing demand has been met through imports via pipelines and import terminals; in particular, LNG imports are growing rapidly, reaching 26.2 million metric tons in 2016.

Although China’s growing demand for gas offers great opportunity for US suppliers, the report says that there are some major challenges. The US only sells LNG to China indirectly via third-party short-term spot trades, unlike many US competitors, such as Australia and Qatar, which already have long-term LNG contracts with China.

In May, US and China agreed to allow Chinese buyers to secure long-term contracts and purchase LNG supplies from the US directly as part of the 100-Day Action Plan. However, only one company – Cheniere – can export large cargoes of LNG from the continental US, and five export terminals under construction are not expected to open until 2020. As a result, Sinopec said it will consider long-term imports from the United States in 2022, the report said.

PetroChina’s Dalian LNG terminal has received 1.38 million metric tons of LNG since the start of this year, PetroChina said October 10, giving no figures for 2016. Since the commissioning of the terminal in 2011, it has received a total of 8.85 million metric tons of LNG, mostly from Qatar and Australia.

Located on the Dagushan peninsula in Dalian city, Liaoning province, Dalian LNG terminal is China's only LNG terminal with reloading capacity. The first phase of the receiving terminal can handle 3.1 million metric tons per year. After the completion of the second phase, the terminal’s capacity will expand to 6 million metric tons per year. When the whole project is completed, the terminal will be capable of receiving 10 million metric tons per year of LNG.

After gasification at the terminal, natural gas supply can be connected to China's northeastern and northern pipeline networks through the pipeline from Dalian to Shenyang, to cover northeast and northern China.

— Natural Gas World