LNG

China National Offshore Oil Corp., the Chinese energy major and with international and domestic LNG interests, has started production at its largest natural gas field in the central Bohai Sea offshore China.

China National Offshore Oil Company (CNOOC), a leading LNG market participant among Chinese oil and gas majors, has outlined its 2023 strategy with higher spending plans, including the targeting of more natural gas, both offshore and in unconventional onshore developments.

CNOOC said the offshore focus in China was on the South China Sea, including development of the Shenhai-1 gas field to promote efficient exploration and development of adjacent gas discoveries.

“We will also focus on five key projects including multi-stratal exploration around the Baodao 21-1 gas field and the rolling exploration around the Yinggehai gas field,” explained CNOOC.

Around the existing offshore Bohai gas fields, Chinese largest in the northeast, it would concentrate on the Bozhong 19-6 area and the Bozhong Depression.

CNOOC added that it was also pursuing an onshore unconventional natural gas programme to target 100 billion cubic metres of resources.

“We will actively promote the integration of exploration and development to increase resources in the Shenfu area,” explained CNOOC, referring to the onshore oil and gas located in the Shaanxi province of northwest China.

Spending

CNOOC’s net production target is between 650 million and 660M barrels of oil equivalent of which production from China will account for 70 percent and overseas resources would provide 30 percent.

Net production is also forecast to reach 690M to 700M Boe in 2024 and 730M to 740M BOE in 2025.

The company’s total capital expenditure for 2023 is budgeted at between 100 billion Chinese yuan ($14.75Bln) and 110Bln yuan ($16.23Bln), of which, capital expenditures for exploration, development, production will account for 18 percent, 59 percent and 21 percent respectively and 2 percent will go on administration.

Analysts said the robust programme suggested continued expansion of the economy in China through 2023 after the Covid-19 restrictions were lifted.

Nine new projects are planned to be brought on stream in 2023, including the Bozhong 19-6 gas field Phase I development in China and two oil fields at Lufeng 12-3 and Enping 18-6.

Overseas projects coming on stream include three developments in South America, the Payara Project in Guyana and the Buzios 5 and Mero 2 projects in Brazil.

The company said it continued to promote greener, lower-carbon developments and is expanding renewables, including its offshore wind project in Hainan, providing an additional 500 million kilowatt hours per annum to the power grid.

For shareholders, CNOOC said it expected to continue its annual dividend pay-out to investors through 2024 of “no less than” Hong Kong dollars $0.70 (US$0.09).

“In the coming year, CNOOC will continue to seek progress while delivering a stable performance,” said Chief Executive Zhou Xinhuai.

“The company will vigorously implement the three major programs of reserves and production augmentation, technological innovation and the green energy transition,” added Zhou.

China National Offshore Oil Corp., one of China’s main LNG importers, said its newly discovered Bozhong 13-2 oil and natural gas field in the Bohai Sea offshore northeast China could prove to be one of nation’s largest resource basins and will be subject to fast-track development.

China’s Huaying Natural Gas, a private company building a city-gas business in the southern province of Guangdong, said it had begun construction of a liquefied natural gas import terminal with receiving capacity of 6 million tonnes per annum.

The facility is located in the port city Chaozhou and involved first-phase investment of 8 billion Chinese yuan ($1.22 billion) and with the start-up scheduled for 2023.

The company also plans to invest 4 billion yuan to build some ancillary facilities at the terminal and to purchase its own LNG carrier to bring in cargoes.

Three gas storage tanks with capacity of 200,000 cubic metres each will be built alongside the first stage of the Chaozhou project and another four storage tank are planned for the second phase.

The Chaozhou terminal will add to the seven LNG terminals already operated in Guangdong province, along with two other projects that are currently under construction.

A total of nine Chinese LNG projects, including new terminals and expansions, were scheduled to advance in 2020, though several have been delayed.

State-controlled China National Offshore Oil Corp. currently has capacity at nine of China’s network of the more than 20 LNG import terminals and ports.

CNOOC’s LNG import capacity is held at most of the regasification terminals south of Shanghai, the port city where it has capacity at one facility.

It has additionally been a foundation customer with the Australia Queensland Curtis export plant on Curtis Island, near Gladstone.

CNOOC said in its most recent earnings that it was planning to increase storage capacity at its Binhai import terminal under construction in the eastern Jiangsu province, where it would reserve two tanks to help with the imported gas needs for a province in Central China.

CNOOC said it would construct around 1.62 million cubic metres more of storage capacity for LNG at the facility.

The expansion will consist of six tanks, each with storage capacity of 270,000 cubic metres each and construction is expected to be completed in 2023.

The first phase of CNOOC’s Binhai LNG terminal is still being built and will be capable of receiving 3 million tonnes of LNG per annum and will have four storage tanks of 220,000 cubic metres each.

Total investment in the project has risen to 17 billion Chinese yuan ($2.60 billion), up from an initial estimate of 14.4Bln yuan ($2.2Bln).

CNOOC said that the government of Henan, a province in central China, will invest in two of the tanks, though CNOOC will operate them to meet growing natural gas demand in both Henan and Jiangsu.

China Petroleum and Chemical Corp. (Sinopec), is the other main Chinese state-controlled LNG importer.

Sinopec, which plans to more than double its LNG receiving capacities to 41MT by 2025, currently has capacity at three Chinese import terminals and is a partner of US major ConocoPhillips in the Australia-Pacific LNG export plant in Queensland.

The Chinese company’s regasification capacity in addition to Tianjin is at two other facilities, the Qingdao terminal in Shandong province and the Beihai LNG terminal in the Guangxi autonomous region bordering Vietnam.

China is currently reforming its pipeline and terminal systems by giving more access to third-party shippers.

Sinopec’s plans include expanding the Tianjin terminal, which supplies Beijing, to have a capacity to handle 12MT of imports.

China National Offshore Oil Corp., the holder of the nation’s largest capacity for LNG imports, plans to increase storage at its Binhai import terminal under construction in the eastern Jiangsu province and will reserve two tanks to help with the imported gas needs for a province in Central China.

Chinese liquefied natural gas imports in June jumped 27.8 percent to 5.79 million tonnes, or around 84 cargoes, compared with 4.53MT in June 2019 as cargo flows built up from nations such as Australia, Qatar and Russia.

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.

The Shanghai Petroleum and Natural Gas Exchange said natural gas transactions reached a record high last year as demand jumped because of gas replacing coal in the general energy mix and as the northern cities adopted policies to reduce pollution.

China National Offshore Oil Corp., the owner of nine LNG import terminals, has a long list of 33 future projects, though only six of the ventures are dedicated to boosting Chinese offshore domestic natural gas output.

Hoegh LNG, the Norwegian fleet owner, posted a rise in third-quarter net income and higher revenues from new floating storage and regasification unit (FSRU) charters, while it was in the final round of tenders for four other projects.