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China seen usurping Japan as world’s leading LNG importer in 5 yrs

Rampant growth in China’s LNG imports this year has fuelled expectations that the country is poised to usurp Japan as the world’s biggest importer of the fuel in just five years, earlier than many had been anticipating.

China is likely to overtake South Korea to become the second-largest LNG importer already next year and could snatch the top spot in 2022, according to analysis by Tony Regan, respected LNG consultant and managing director of consultancy DataFusion Associates.

Mr Regan is forecasting a proliferation of companies in China that import LNG, increasing from eight currently to potentially 20 within five years.

While Chinese LNG buyers currently have more purchase contracts for the fuel than they need, the aggressive growth forecast points to significant demand for further supply commitments, with those emerging buyers likely to dominate new contract deals, he said.

China is “a very dynamic market, getting nearly half its LNG from Australia,” Mr Regan said.
“Australia is by far the largest supplier of LNG to China, with a market share of 48 per cent in the first half of 2017.”

The forecast appears to augur well for players such as Woodside Petroleum, which is seeking to expand LNG output from its Burrup “hub” concept in Western Australia.

Woodside is aiming to select a revised design plan for the development of its large Browse gas resource this half, and is also studying alternatives to expand production at its Pluto LNG plant, including a 700,000 tonnes a year “debottlenecking” or a circa 1.5 million tonnes a year standalone, small-scale train that would be bolted onto the existing plant.

In August Woodside chief executive Peter Coleman pointed to the strong demand outlook for LNG from Asia, citing Wood Mackenzie’s forecast for a 19 per cent compound annual growth rate in Chinese demand between 2016 and 2020, and 35 per cent from the much smaller market of Pakistan.

According to DataFusion, China’s imports of LNG in the first eight months of 2017 were up 44 per cent from a year earlier at 22.2 million tonnes, driven by the ramp-up of supplies from Origin Energy’s APLNG project in Queensland and Chevron’s Gorgon project in Western Australia.

The consultancy’s base-case forecast sees LNG imports into China increasing from about 34 million tonnes this year to 57 million tonnes in 2020 then to 90 million tonnes in 2025. By 2030 forecast imports reach 126 million tonnes in the base case, or as high as 196 million tonnes in the high case.

Bernstein Research also has a strong forecast for LNG growth in China, expecting demand to treble by 2030 thanks to government’s pro-gas policies. It expects global demand growth in LNG to hit double digits this year for the first time since 2011, driven by emerging markets, and is forecasting a new wave of project approvals starting in 2019.

LNG sales within China jumped by 45 per cent in the first half, driven by stronger demand from the industrial sector and a revival in consumption by the transportation sector, where LNG is beating diesel on price, DataFusion said.

Over the next five years, gas demand growth is expected to be driven by the intensifying effort to cut air pollution in the Beijing-Tianjin-Hebei area, with several cities required to be coal-free by October this year.

Soft Asian prices for LNG are also allowing the liquefied imported fuel to beat pipeline gas imports on cost. Landed prices for LNG imports in the June quarter of about $US6 per million British thermal units meant it was possible to truck LNG as far as 500 kilometres from an import terminal and still undercut piped gas by 30 per cent, DataFusion said.
Source: Australian Financial Review

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