LNG

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

A total of 54.28 million tonnes of natural gas was imported in the first five months of 2024, up 17.4 percent versus the previous year, according to data published by the National Bureau of Statistics (NBS) in China.

Chinese energy majors also produced 103.3 billion cubic metres of natural gas in the January-to-May period, up 5.2 percent from a year earlier.

In May alone, the natural gas output expanded 6.3 percent year-over-year to 20.3 Bcm.

LNG and crude

China's LNG imports increased slightly in May, according to other data from the Chinese General Administration of Customs.

China imported 6.57 million tonnes of LNG last month, an increase of 2.5 percent from the 6.41MT received in May 2023.

Imports of LNG to the Chinese network of 25 regasification terminals in April 2024 had soared by 31.5 percent to 6.22MT compared with 4.77MT in April 2023.

In the first five months of 2024, China's total LNG imports reached 32.42MT, up about 17.7 percent compared with the 27.54MT received in January-to-May 2023.

The Chinese NBS data additionally showed that China's crude oil production in May rose by 0.6 percent from a year earlier to 18.15 million tons, or about 4.27 million barrels per day.

From January to May, output grew 1.8 percent on the year to 89.1MT, or 4.28 million bpd.

The NBS data added that China’s oil refinery output slipped by 1.8 percent from the previous year because of maintenance turnarounds and falling profit margins

Refiners undertook planned maintenance overhauls and processing margins were pressured by rising crude costs.

The major refiners such as Sinopec and PetroChina processed 60.52MT of crude oil in May, the equivalent to 14.25 million bpd.

Throughput

Refinery throughput for January to May was up just 0.3 percent from a year earlier at 301.77 MT, or 14.49 million bpd, the data showed.

This was down from 14.3 million bpd in April and 14.6 million bpd in May 2023.

The data showed that refining numbers were lower than a year earlier, reflecting higher crude costs and lagging domestic fuel prices, despite a brief spike in fuel demand during a Chinese holiday period in the first week of May for travel by car and the use of gasoline

Jet fuel use from refining was also lower with the number of domestic flights declining by 1.79 percent year-over-year in May to 778,210 flights but were still up 8.26 percent from pre-pandemic levels in 2019.

International flights out of China roughly doubled from May 2023 to 58,878, though they remained 28.74 percent lower than in the pre-Covid 19 period of May 2019.

The Iraqi Oil and Gas Ministry said 10 of the 12 projects awarded so far in Iraq's latest licensing round have gone to Chinese companies as the Arab nation focuses on increasing natural gas output to help support growing gas-fired power needs.

The first ever liquefied natural gas cargo paid for in Chinese yuan instead of US dollars has been unloaded at an import terminal in China’s southern Guangdong province.

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.

Chinese natural gas imports, including LNG and pipeline natural gas, dropped by 9.5 percent in the first nine months of 2022 as the economy slowed while China paid over 40 percent more for its gas during the period.

Japan companies have until the end of July to decide whether to maintain stakes in the Sakhalin II liquefied natural gas export project in the Russian Far East.

The Japanese government is currently coordinating possible future arrangements with the two Japanese LNG stakeholders in the Sakhalin plant, Mitsui & Co and Mitsubishi Corp.

Under the retention plan, Mitsui and Mitsubishi would keep 12.5 percent and 10 percent stakes respectively, even after Russian President Vladimir Putin's signing of an order that sets up a new operating company to safeguard control by Russia of the oil and gas ventures on and offshore Sakhalin Island.

According to the new Sakhalin II LNG operating company decree, foreign shareholders have until the end of July 2022 to apply to retain their existing shares in the new LNG operating entity after it is established.

Analysts noted that Japan acquires about 9 percent of its LNG from the Sakhalin II plant but pressure has mounted on the Japanese to quit Sakhalin amid sanctions and a pull-out by the other main shareholder Shell over Russia’s invasion of Ukraine.

Gazprom owns just over a 50 percent stake in the Sakhalin II operating company, while Shell held around 27.5 percent and the balance is owned by Mitsui and Mitsubishi.

China interest

The Sakhalin II plant began LNG exports in 2009 and has annual capacity from its two Trains of around 10 million tonnes per annum with shipments going mainly to Japan and South Korea and with China standing by to take over any relinquished Japanese stakes.

A statement said that the Japanese Prime Minister Fumio Kishida and Koichi Hagiuda, the Minister of Economy, Trade and Industry, discussed the Sakhalin energy supply issue at a meeting on July 15.

The Kishida government has stressed the need to retain interests in oil and gas projects off Sakhalin as they are vital to securing stable energy supplies in a global environment of surging energy prices.

The Mitsui and Mitsubishi stakes in Sakhalin II are in addition to Japan’s investments in the Sakhalin 1 project, Sakhalin Oil and Gas Development Co. though a consortium including Japan Petroleum Exploration Co, Japan National Oil Corp, Itochu Corp and Marubeni Corp.

US major ExxonMobil, the operator of Sakhalin I, has already announced its pull-out from the oil venture where it said other shareholders in addition to the Japanese included Russian and Indian companies.

These are units of oil company Rosneft and the New Delhi-based Indian company ONGC-Videsh.

The Japanese companies have taken part in the Sakhalin I oil project since 2006 and they have been main customers for the oil shipments.

China said its natural gas production last month increased by 7 percent from the same month a year ago as its LNG and pipeline gas import needs also rose.

China National Offshore Oil Corp., the state-backed oil and gas producer and the nation’s largest LNG import terminal owner, said annual net profits rose almost 16 percent as it achieved record production in 2019.

China National Offshore Oil Corp., the owner of nine Chinese LNG import terminals and multiple oil and gas stakes, has outlined its business strategy and development plan for 2020 with 10 new projects scheduled to come on stream.

PetroChina, the Hong Kong-listed unit of China National Petroleum Corp. with widespread domestic assets and overseas stakes in oil and gas fields as well as Yamal LNG and an onshore liquefaction project in Mozambique, posted a jump in profits because of higher energy prices and soaring demand for natural gas.

Annual net profits at PetroChina amounted to RMB52.6 billion yuan ($7.86Bln) compared with 22.79 billion yuan ($3.39Bln) in 2017, a rise of 130.7 percent.

PetroChina posted a 16.8 percent rise in group revenues to 2.35 trillion Chinese yuan ($350.44 billion) in 2018 compared with 2.01 trillion yuan ($300.3Bln) in 2017.

In addition to holding its share in the Yamal joint Venture in Arctic Russia, PetroChina has a stake in the Area 4 reserves in the Rovuma Basin offshore Mozambique with Italian company Eni and ExxonMobil of the US that will underpin their Rovuma LNG project.

The plan submitted to the Mozambican government in Maputo gives details of the proposed design and construction of two processing Trains which will each produce 7.6 million tonnes per annum of LNG from the Mamba gas field.

“The Group seized the opportunity arising from the increase of international oil price in the first three quarters and the strong demand for natural gas,” stated PetroChina in its earnings statement.

PetroChina explained that the domestic output of natural gas steadily increased and imports of natural gas increased significantly, resulting in China surpassing Japan and becoming the largest importer of natural gas in the world for the first time.

“The overall supply and demand in the market was a bit tight. The country sped up the marketization of the natural gas prices, merged the city-gate prices of natural gas for residential and non-residential stations and further strengthened the regulation on pipeline transportation prices,” said PetroChina.

“The Shanghai Oil and Gas Exchange launched LNG terminal open-access transactions and the Chongqing Oil and Gas Exchange started international LNG transactions,” noted PetroChina.

China’s overall domestic output of natural gas amounted to 159.4 billion cubic metres in 2018, representing an increase of 7.2 percent compared with 2017.

PetroChina said natural gas imports were 124.2 billion cubic metres, representing an increase of 35 percent compared with 2017, while consumption of natural gas amounted to 280.3 Bcm, a rise of 18.1 percent versus 2017.

“The global economy recovered moderately, though various economies proved uneven in their respective development, resulting in increasing unstable and uncertain factors in international politics and economy,” added PetroChina.

“The economy of China remained generally stable with good momentum for growth,” it said.

China is also reliant on oil imports as its domestic output of crude oil in 2018 was just 189.28 million tons, representing a decrease of 1.1 percent compared with 2017.

“The group tried to improve the efficiency and profitability of its exploration activities and tried to reinforce the base of resources for keeping oil production stable and increasing gas output,” said PetroChina.

“In the Junggar Basin of Xinjiang, another significant discovery of exploration was made after that of the Ma Lake area,” it added.

“The oil and natural gas exploration in the Tarim Basin and Sichuan Basin successively made a new breakthrough. A group of reserves were also discovered and confirmed in the Erdos, Qaidam, Bohai Bay and Songliao Basins,” stated PetroChina.

“We pushed forward the development of unconventional oil and gas with steady steps and maintained momentum in growth of output of shale gas and coalbed methane,” explained PetroChina.

“In 2018, the domestic business achieved crude oil output of 733.7 million barrels, representing a decrease of 1.3 percent compared with 2017, and a marketable natural gas output of 3,324.7 billion cubic feet, representing an increase of 5.4 percent year-on-year,” it said.

In its overseas operations, PetroChina said total crude oil output amounted to 890.3 million barrels, representing an increase of 0.4 percent compared 2017.

“Overseas marketable natural gas output reached 3,607.6 billion cubic feet, representing an increase of 5.4 percent,” it added.

PetroChina said that at the end of 2018 it had global exploration rights for oil and natural gas amounting to 295.5 million acres.

“The number of net wells in the process of being drilled was 499 and the number of wells with multiple completions during the current reporting period was 9,792,” said PetroChina.