LNG

China's natural gas imports as LNG cargoes and pipeline increased by more than 14 percent in the first half of 2024 compared with the same period last year, though slowed right down during the month of June.

LNG and pipeline gas imported volumes totalled 64.65 million tonnes in the January-to-June period, which was a 14.3 percent year-over-year rise from the 56.63MT logged in the same period of 2023.

Total natural gas imports for the month of June increased by only 0.3 percent to 10.42MT tonnes compared 10.39MT in June 2023.

The natural gas market in the Northern Hemisphere summer season has been marked by lower prices and higher storage levels.

Main suppliers

China’s main LNG suppliers in 2024 have been Australia, Qatar, Malaysia, Indonesia and the Yamal plant in Arctic Russia and to a lesser extent the US.

US data shows that China has dropped to the ninth preferred destination for US LNG deliveries as the focus has turned to Europe.

China's natural gas imports by pipelines as well as LNG had increased for May and during the first five months of 2024 along with domestic natural gas production.

A total of 54.28MT of natural gas was imported in the first five months of 2024, up 17.4 percent versus the previous year.

Imports of LNG to the Chinese network of 25 regasification terminals had increased in 2023 and the nation regained the No. 1 spot as the largest LNG importer ahead of Japan.

Japan’s 2023 calendar year LNG imports dropped by 8.1 percent in 2023 to 66.15MT compared with China’s overall imports of 71.35MT.

Russian pipelines

China receives varying volumes of pipeline gas through links from the former Soviet Central Asian republics as well as from Russia as part of Gazprom's “Power of Siberia” project.

The “Power of Siberia” pipeline runs for 3,000km (1,865 miles) through Siberia and into northeast China and a “Power of Siberia II” pipeline is being planned to deliver gas to China via Mongolia.

Additional pipelines inside China carry the gas for a further 2,110km through eight Chinese provinces in the north to Shanghai in eastern China.

Woodside Energy, the leading supplier of Australian LNG cargoes to North Asia, has signed a sale and purchase agreement with the South Korean state-owned utility Korea Gas Corp. as more Asian nations seek to secure long-term supplies for energy security.

The SPA provides for the supply of around 500,000 tonnes per annum of LNG for a period of 10.5 years on a delivered basis whereby Woodside supplies the shipping.

The supply deals with the Koreans begin in 2026 and will come from Woodside’s portfolio.

“LNG delivered to Kogas under the SPA will be sourced from uncommitted volumes across Woodside’s global portfolio, including the Scarborough Energy Project which is targeting first LNG cargo in 2026,” explained Woodside.

Kogas already receives Australian LNG cargoes from other regional projects such as Gladstone LNG in Queensland.

Queensland LNG

The GLNG plant is operated by Adelaide-based Santos and Kogas is a shareholder along with French major TotalEnergies and Malaysia’s Petronas.

The state-owned Korean utility has been a long-term regional importer from nations like Indonesia and Malaysia as well as Qatar and Oman in the Middle East.

Woodside Chief Executive Meg O’Neill said that the SPA was significant as Woodside’s first long-term supply agreement into Korea, the world’s third-largest LNG market.

She said the agreement reinforced the ongoing contribution of Woodside’s LNG towards the energy security needs of major customers in the region.

“Woodside is pleased to be a long-term supplier of LNG to Kogas, a leading global energy company and one of the world’s largest LNG importers,” said O’Neill.

“This agreement is further demonstration of ongoing robust demand for Woodside’s products from major energy customers in our region,” O’Neill stated.

LNG for power

Kogas President and CEO Choi Yeon-Hye said she was pleased to conclude the SPA with Woodside.

“This SPA has enabled Kogas to enlarge the customer base in the domestic power market, reinforcing our role as a leading natural gas supplier in Korea,” she stated.

“By leveraging this SPA, we look forward to further expanding our business opportunities with Woodside in the LNG industry,” added Choi.

Kogas controls or jointly controls five out of South Korea’s seven import terminals at Incheon, Pyeongtaek, Samcheok, Tong-Yeong and Jeju.

The other two terminals are at Gwangyang and Boryeong and are used respectively by steelmaker POSCO and other utilities.

Chinese liquefied natural gas imports in August 2022 to its network of 22 regasification terminals tumbled by 29 percent because of a mixed economic recovery, high spot prices and more pipeline natural gas imports.

Australian ministers in the new Labor government are scheduled to meet in the coming week after the Australian Energy Market Operator triggered the Gas Supply Guarantee Mechanism for the first time since the measure was introduced in 2017 to secure domestic gas for power generators amid potential shortfalls in southern states.

New Prime Minister Anthony Albanese took office after his Labor Party defeated former PM Scott Morrison and his conservative Liberal-National coalition in the May 21 parliamentary elections.

Increased winter demand for energy, unscheduled outages at coal-fired power stations and gas shortages due to the war in Ukraine have led to soaring gas and electricity prices across Australia.

Energy Minister Chris Bowen said he would convene the meeting next week.

“After being sworn in I spent the morning being briefed by my department and by AEMO on the current situation on gas supply and the energy markets particularly in the East Coast,” said Bowen.

“I’ve also spoken his morning to the Treasurer and Energy Minister of New South Wales Matt Kean, to the Energy Minister of Victoria Lily D’Ambrosio, the Energy Minister of Queensland Mick de Brenni, the Energy Minister of Tasmania Guy Barnett, the Energy Minister of Western Australia Bill Johnston, and the Energy Minister of South Australia Tom Koutsantonis,” he explained.

“I’ve also briefed the Treasurer and the Resources Minister Madeleine King and the Industry Minister Ed Husic on the current situation,” he added.
There have been calls for the government to pull the gas trigger, known as the Australian Domestic Gas Reservation Mechanism, to divert exports and shore up domestic supply.

Gas price surge

Bowen said any use of the emergency mechanism wouldn’t impact gas prices in the short term.

“That’s a misunderstanding of how the mechanism works. It cannot come into force until January 1 next year,” he told reporters in the capital Canberra.

Bowen stated that he did not hold the former government accountable for any particular element of the crises Australia was facing.

“For the very serious situation we are facing. I do say this though: the former government’s nine years of denial and delay, their 23 energy policies, their ad hocery, their challenges in approaches have left Australia ill-prepared and our energy markets ill-prepared for the challenges we are facing today in relation to gas and energy supply,” he said.

“The previous government did not do the work necessary to increase renewables, to increase storage. If we had more storage and more renewables and better transmission, we would be much better placed to deal with the current challenges,” he added.

“And that’s, of course, exactly what our Powering Australia plan seeks to implement. But, of course, it will take some time to implement,” stated Bowen.

Opposition Leader Peter Dutton called the characterisation of the former conservative government’s policies as a “complete rewrite” of history.

“This government went to the election saying they had the answers and clearly they don’t. You look at Chris Bowen now, he is like the bunny in the headlights and he has no idea which way to go,” stated Dutton.

“This is nothing to do with renewables. I think the government has to take responsibility for what is a serious issue,” added Dutton.

“It seems to me that the inexperience of both Anthony Albanese (the new Prime Minister) and Chris Bowen is shining through. They have got the ability and the legislation there to deal with this and they don’t know what they should do,” stated Dutton.

The Australian Government says that Asian liquefied natural gas spot prices and oil-linked LNG contract prices are expected to remain high throughout 2022 and 2023 and would only decline back to non-crisis levels around 2027, depending on geopolitical events.

ENN Group, the leading non-state energy company in China with LNG and growing city-gas assets, reported a more than 18 percent jump in first-half profits as revenues soared, boosted by increased business in LNG and in expanding retail, wholesale and industrial gas supply markets.

China’s National Development and Reform Commission (NDRC), the nation’s economic planning body, has urged energy companies to increase imports of liquefied natural gas and thermal coal for power generation as colder weather hits northern China around the capital Beijing and is forecast to last for weeks.

China Petroleum and Chemical Corp. (Sinopec), one of the largest LNG importers, said it would seek more volumes on the spot market.

Sinopec and PetroChina, the Hong Kong-listed affiliate of China National Petroleum Corp. and another LNG importer, have also said they would be increasing shale-gas production under five-year plans.

Sinopec, a shareholder in the Australia-Pacific LNG plant in Queensland operated by ConocoPhillips, said its regasification terminals at Tianjin Port in the north and the east China Qingdao facility would both handle record volumes in January.

The company said it would also increase domestic natural gas production by another one million cubic metres per day by the end of January by accelerating the drilling of new development wells.

Sinopec said it was additionally extracting gas from its underground storage in central and east China, while maintaining high inventories at LNG storage tanks.

Chinese LNG imports soared to a record in November and surpassed the monthly total of shipments received by Japan, the world’s largest LNG importer.

Another record of LNG volumes is forecast to be announced for December. China’s November imports amounted to 6.61 million tonnes, 2.4 percent from a year earlier, while Japan’s November shipments came to 6.02MT.

For the first 11 months of the year, China received shipments totalling 59.54MT, an increase of 10.7 percent compared with the same period of 2019.

November 2020 is the fifth time that China had taken the position of the largest LNG importing country on a monthly basis, following November 2019 and May, June and August 2020.

China’s main LNG suppliers are Australia, Qatar, Malaysia, Indonesia, Russia and the US.

At the same time, PetroChina and Sinopec are planning to increase their shale-gas output over the next several years from the Sichuan shale basin in central China.

PetroChina aims to more than double shale gas production in Sichuan to more than 22 billion cubic metres by 2025.

That will surpass a target set by Sinopec, which led China’s shale gas development with the first commercial discovery at Fuling in Sichuan, from the current 7.5 Bcm of output to 13 Bcm by 2025.

Sinopec has added 83 Bcm of newly proven reserves that have yet to enter production at the Chuanxi field in Sichuan.

The reserves, certified by the Chinese Ministry of Natural Resources, raise the field’s total proven resources to 114 Bcm.

The reservoir is spread over 138 square kilometres in the western part of the basin at depths of 6,000 metres.

However, shale gas output is limited in China in that by 2025 the total annual production by Sinopec and PetroChina combined would only amount to the LNG shipments from one large US Gulf Coast LNG export plant.

PetroChina’s shale operations are centred in the Yibin, Zigong, Neijiang, Luzhou and Yongchuan regions of the Sichuan Basin.

The company started appraising shale gas blocks in the Sichuan basin in 2006 and made its first major discovery with the Wei-201 well in 2010.

The latest LNG market report from Australia said LNG supplies to China are still strong even amid trade tensions that led liquefaction plant operator Woodside Petroleum to suspend talks with the Chinese over taking a stake in the Scarborough gas field offshore Western Australia.

Australian liquefied natural gas export plants in Western Australia and Queensland exported a total of 93 cargoes in May, with six of them spot cargoes, down from 101 shipments the previous month, while deliveries to China kept their momentum as Japan and South Korea imports were lower or flat.

The Australia-Pacific LNG plant in Queensland, owned by ConocoPhillips, Australian utility Origin Energy and Chinese major Sinopec, has shipped its 500th cargo, with the destination being China.