China National Petroleum Corporation (CNPC) will procure 4 million tons of LNG from QatarEnergy over 27 years in a move that tilts China’s power gen mix more towards natural gas. With the largest coal ports in China situated near some large LNG import terminals, power producers in the area can easily switch fuel to maximise their returns.
Apart from purchasing large volumes of LNG, CNPC will take an equity stake in Qatar’s North Field LNG project. That stake equals to about 5 percent of one liquefaction train with 8 mtpa capacity. QatarEnergy is selling 5 percent in these trains to what it calls “value-added partners,” which also include China’s Sinopec. The North Field expansion is estimate to cost over $30 billion and Qatar plans to retain a 75 percent majority stake in the project.
Imports could jump 15 percent
With China’s industrial gas use rapidly rebounding after lockdowns were lifted, the country’s overall demand growth will rise 6 percent this year and LNG imports could jump up to 15 percent compared to 2022-levels, the International Energy Agency (IEA) finds.
Gas-burn in the Chinese power sector is likely to rise even further after the government’s zero import tax policy on thermal coal will come to an end this December. An influx of cheap thermal coal imports and fast renewables build-out has reduced gas-burn for power generation while the city gas segment saw a 7 percent growth as the economy is reopening.
The pandemic had caused an unprecedented 20 percent plunge in China’s LNG imports which facilitated a swift growth in LNG deliveries to Europe which struggled to replace missing Russian supplies. By March 2023, however, China’s imports of the super-chilled gas recovered to double-digit figures with analysts anticipating full-year inflows to rise between 10 and 15 percent year-on-year while remaining below record 2021-levels.
Competition is mounting as “LNG effectively became a new baseload supply for Europe,” analysts noted, accounting for two-third of the region’s imports and meeting around one-third of its gas demand through the 2022/23 winter season. But after strong growth in the first quarter, Europe’s LNG imports are anticipated to fall by around 5 percent for the rest of the year amid gas saving measures and as expanding renewables weigh on gas-fired generation.
