Main LNG terminal owner in China and Shanghai Exchange offer limited third-party access

Wednesday, 13 March 2019
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China National Offshore Oil Corp., the largest liquefied natural gas terminal owner, is planning to open up several of its facilities to third-party access (TPA) and expressions of interest are required by the end of March in the proposal backed by the Shanghai Petroleum and Natural Gas Exchange.

The initiative by CNOOC and the Shanghai Exchange are part of a series of natural gas market reforms to back increasing demand for imports to support both economic development and the government’s clean air policies.

The Shanghai Petroleum and Natural Gas Exchange was inaugurated in November 2016 after a year-long trial operation as part of energy reforms in China.

CNOOC, owner of nine of China's 19 onshore import terminals, sold imported LNG for the first time on the exchange in April 2018 for forward delivery.

Under the Chinese TPA plans, each third-party user must take in a minimum of four cargoes, equivalent to 260,000 tonnes per annum, over 10 years.

A statement by the Shanghai exchange said that this requirement may be increased in multiples of four cargoes.

“The long-term TPA could be granted to more than one company, while there were no firm rules yet on the amount,” according to the statement.

Analysts said that while the initiative opens the way to allow more independent buyers to enter the market, there was concern about having to lock in third-party customers in terms of price and volumes for a 10-year term.

Expressions of interest have to be submitted by March 31. The exchange said subsequent negotiations would then take place in April and May on pricing and delivery details.

During a trial for the process held in 2018 by CNOOC and the exchange, TPA was offered at the Yuedong LNG terminal in the southern province of Guangdong at the end of October and at the Ningbo facility in the eastern Zhejiang province in November.

The Chinese proposal is a move towards the policies of the European Union requiring member states to provide open access to gas infrastructure, including LNG terminals.

The conditions and tariffs of TPA to regulated LNG terminals in Europe must be published by terminal operators as well as approved by the national regulator.

However, in the Europe market exemptions to the regulated TPA regime have been granted to six major operating terminals: three in the UK, the Isle of Grain, Dragon LNG and South Hook facility, one in France at Dunkirk LNG, one in Italy at the Adriatic terminal and one in the Netherlands at Gate LNG in Rotterdam.

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