China Soaring Past Japan In Liquefied Natural Gas Imports
China will soon surpass Japan as the world’s largest importer of liquefied natural gas (LNG), quickly becoming the most vital way of trading the world’s go-to fuel.
In 2018, China became the world’s largest gas importer (for total piped supply and LNG), and its ascent to the top LNG spot is happening much faster than previously predicted.
This all makes perfect sense.
Japan is a fully developed country with low incremental energy needs, has a declining population, and retains a nuclear restart program that lowers the need for LNG.
Japan’s LNG imports are expected to drop by at least 12% over the next three years alone.
In contrast, with gas accounting for just 6-8% of the energy that it uses, China has a gasification program to lower an over-dependence on coal and clear dangerously polluted skies with cleaner natural gas.
Using gas instead of coal for home heating is national necessity.
Driven by a continued urbanization that is giving people more money and more access to gas, China’s gas demand could almost double to 550 billion cubic meters (Bcm) by 2030.
Most Westerners probably do not realize that China is still just 60% urbanized, compared to 85% and above for the world’s richest countries.
Driven by environmental policies, demand from the industrial sector will be the key driver of China’s gas demand, with electricity second.
Industry accounts for some 40% of China’s gas consumption, compared to almost 20% for power generation.
In 2018, China’s gas used for industry was up over 20% to 115 Bcm.
In turn, LNG imports last year were up 40% to almost 75 Bcm.
These gains are made all the more impressive: “China’s GDP growth slows to 28-year low in 2018.”
This year so far, LNG imports are up about 20%, and passing Japan sits clearly on the horizon.
The trade war with the U.S., the world’s emerging LNG exporter, will not slow China’s strong LNG growth.
China now has a 25% tariff on U.S. LNG.
Qatar, Australia, Russia, and potentially even Canada will be more than happy to supply.
Australia has already been supplying over 50% of China’s LNG this year.
China now has 22 LNG import facilities, with another 12 in the works.
Earlier this year, the consensus was that China’s LNG imports would surpass 100 Bcm by 2024.
Yet, that is going to happen next year, or four years earlier than what was being predicted just a few months ago.
And by 2025, China’s LNG imports could surge to 155 Bcm or more – which is 35% of the current global market.
That would be well more than double what all of Europe is now importing.
LNG demand has been rising so fast that China relies on gas imports to meet nearly 50% of its gas usage, despite a domestic production jump of 60% since 2011 – an even more impressive jump since domestic shale output has failed to meet expectations.
To ensure national gas supply security, long-term LNG contracts will remain strong despite steady growth in spot trading.
China is heading toward a more liberalized gas market, having better pricing mechanisms, greater access to infrastructure, and more liquid and transparent gas trading hubs – just like those found in the West.
Looking forward, excess supply has put Asian LNG prices at 10-year lows, so China’s demand could ultimately be even higher than expected.
Indeed, it often goes underestimated how such low prices are locking in more usage and making other sources like wind and solar power less competitive with gas. `