LNG

UK major BP has signed a sale and purchase agreement with China's State Power Investment Corp. (SPIC) for supplying pipeline natural gas to the southern province of Guangdong province for a period of 10 years starting from 2023.

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.

The Chinese government said the nation had taken formally brought the pipeline and storage assets of the largest energy majors under the newly formed China Oil & Gas Pipeline Network Corp. while paying for the assets and giving the majors stakes in the company.

China National Petroleum Corp. (CNPC), the largest of the majors, said it would sell most of its oil and gas pipelines and storage facilities to China Oil and Gas Pipeline for 268.7 billion yuan ($38.30 billion) and hold a 29.9 percent stake in the new national pipeline and storage company.

CNPC will be the largest shareholder of the Chinese majors in China Oil & Gas Pipeline.

“By interconnecting the country's oil and gas pipelines, the new company will help raise the allocation efficiency of oil and gas resources and ensure safe and stable energy supply,” said a government statement.

The new centrally administered China Oil & Gas Pipeline, also known as PipeChina, was established in December 2019 to be responsible for the investment, construction and interconnection of oil and natural gas pipelines, as well as third-party access to LNG terminals and storage facilities.

China has around 64,000 kilometres (about 40,000 miles) of pipelines carrying natural gas, 27,000km carrying oil and 21,000km carrying petroleum products such as gasoline and jet fuel, according to the most recent figures from China’s main economic planning agency.

Most of the pipelines were owned under the name of CNPC’s Hong Kong-listed affiliate PetroChina.

PetroChina’s dominance of the oil and gas distribution network was seen as having a negative impact on domestic exploration and production as other companies could be blocked or have to pay expensive fees to get their oil and gas to market.

Under its statutes, China Oil and Gas Pipeline is set to offer open access to pipeline networks to approved companies.

Another stake in China Oil & Gas Pipeline will be held by the country's largest oil refiner, China Petroleum and Chemical Corp. (Sinopec) in return for the sale of some of its oil and gas pipeline assets

Sinopec’s transferred pipeline assets are valued at 122.7Bln yuan ($17.48Bln). It will receive a 14 percent stake in China Oil & Gas Pipeline and 52.7Bln yuan ($7.51Bln) in cash.

“Sinopec Natural Gas entered into the agreement on additional issuance of equity and cash payments to purchase assets with PipeChina, pursuant to which Sinopec Natural Gas proposed to transfer equity interests in the relevant oil and gas pipeline companies to PipeChina,” explained Sinopec.

The government statement made no mention of asset transfers from China National Offshore Oil Corp., the nation’s biggest LNG importer, but whose pipeline network delivery assets are much less than those of CNPC and Sinopec.

Analysts said the start of operations by China Oil & Gas Pipeline will have an impact over time on the access of LNG imports to the domestic natural gas network and market, which is still separated into North and South because of still inadequate infrastructure between provinces.

One of its tasks in addition to enabling third-party access to LNG terminals is to improve pipeline flows nationwide and to be an investment vehicle for more natural gas and storage facilities.

That’s as Chinese LNG imports in June jumped 27.8 percent to 5.79 million tonnes, or around 84 cargoes, compared with 4.53MT in June 2019, according to data from the General Administration of Customs.

In the January-June period, the LNG shipments to China increased by 9.9 percent percent to 31.18MT versus 28.37MT in the first half of 2019.

The data also showed that China’s pipeline natural gas imports dropped 15 percent to 2.54MT and fell in the first half by 7.4 percent to 17.18MT.
China imports its pipeline gas from Myanmar, Turkmenistan, Kazakhstan, Uzbekistan and Russia.
China’s main LNG suppliers are Australia, Qatar, Malaysia and Indonesia, while the US has just resumed LNG shipments.