LNG

The Hong Kong floating liquefied natural gas import project has begun commissioning for the start of commercial operations planned for June using the world’s largest floating storage and regasification unit, the “FSRU Bauhinia Spirit”.

The commissioning cargo, provided by Hong Kong stock exchange-listed Chinese major, PetroChina, was unloaded on May 15 and will contribute to cool-down operations along the specially built jetty, as well as the storage tanks and pipelines.

Two subsea gas pipelines are connected from the FLNG terminal to Hong Kong’s Black Point Power Station and the Lamma Power Station respectively.

The terminal trial processes are also part of the procedure before the senior project contractor, the China Offshore Oil Engineering Company (COOEC), a subsidiary of China National Offshore Oil Corp. (CNOOC), hands over the facility to the joint venture company Hong Kong LNG Terminal Ltd.

Owners

The owners of the terminal venture are the two local power utilities, Hong Kong Electric Power Co. and Castle Peak Power (CLP) Hong Kong Ltd..

They had initially proposed the terminal to Japanese shipping company, Mitsui OSK Lines, using MOL’s “FSRU Challenger”, now renamed “FSRU Bauhinia Spirit” and with 263,000 cubic metres capacity.

The FSRU had arrived offshore Hong Kong in the middle of April to prepare for the project launch at a site about 25 kilometres (15.5 miles) southwest of Hong Kong Island

HK Electric is the historic supplier of electricity to customers on Hong Kong and Lamma Islands.

CLP Hong Kong Limited (CLP Power) is a subsidiary of CLP Holdings, a company listed on the Hong Kong Stock Exchange and now one of the largest investor-owned power businesses in Asia.

The CLP Group has other power assets in Mainland China, Australia, India, Southeast Asia and Taiwan.

The Hong Kong project increases regasification facilities available to the Chinese to 25 and with half-a-dozen other projects planned on the mainland, not including the expansion of existing terminals.

Coal-to-gas

CLP Power said that it had substantially increased the proportion of natural gas in Hong Kong’s fuel mix to around 50 percent since 2020.

“Planning and construction of the offshore LNG terminal began a few years ago which underlines the importance of long-term planning to the energy industry,” added CLP Power.

HK Electric’s Managing Director Wan Chi-Tin said that the utility has always aimed to switch from coal-fired to gas-fired generation as natural gas is a fuel for the energy transition.

“The commissioning of the gas-fired unit L11 in 2022 at Lamma Power Station enabled us to generate over half of our electricity from natural gas,” he said.

“Another gas-fired unit, L12, is expected to commence operation in early 2024, which will further increase the share of natural gas in our fuel mix. The offshore LNG terminal, once in operation, will enhance supply security and cost effectiveness,” Wan added.

Chinese natural gas imports, including LNG and pipeline natural gas, maintained rapid growth in September with imports amounting to 10.62 million tonnes, a year-on-year increase of 22.7 percent.

Yantai Port Group, the Chinese cargo transportation, warehousing and harbour management company in the northeast province of Shandong, is taking part in three liquefied natural gas storage and terminal projects to be completed between 2022 and 2025.

Port executives said government approvals for the ventures were making their way through the regulatory process to be located in Yantai Port, one of China’s industrial and petrochemical hubs.

The current terminal project under construction involves a partnership with Shandong Poly-GCL Pan-Asia International Energy and the storage tanks are now being built.

The terminal developers are negotiating future LNG supplies and hosted a visit in March 2021 of a Canadian diplomatic delegation to view the progress of the LNG terminal build-out.

Yantai port is initially aiming to construct two sets of tanks of 316,000 cubic metres of storage and receiving capacity of around 6 million tonnes per annum.

Yantai Port and its joint venture firm Yantai LNG also plan to offer contracts for the building of two other facilities, each with 5 MTPA of capacity.

Yantai is regarded by the government in Beijing as a core platform of what it calls the Northeast Asia economic circle.

The port is an important economic development hub for the areas of the Bohai Sea Rim, the Yangtze River Delta and Shandong Province itself.

Investment is also planned for a separate 5 MTPA storage and terminal project backed by China National Petroleum Corp. with a start-up date set for 2023.

Yantai would take a 49 percent stake in that project with CNPC holding the majority share of 51 percent, likely through its Hong Kong-listed affiliate PetroChina.

LNG Canada, the export project in British Columbia under construction near Kitimat, has PetroChina as one of its shareholders.

Shandong Oil & Gas and Yantai Port have signed an agreement to cooperate on what would be the third import venture.

Shandong Oil & Gas will take the lead in completing the project’s 530-kilometres pipeline that would connect the terminal to cities across Shandong province and to the national gas grid.

The plan for the Shandong Oil & Gas and Yantai venture is to build six 200,000 cubic metres LNG storage tanks in two phases. 

China National Offshore Oil Corp. (CNOOC), a large holder of Chinese LNG import capacity, raised its year-to-date domestic natural gas production to 311.3 billion cubic feet from 250.6 Bcf in the same nine-month period last year as the nation overhauls the ownership structure of its terminals and pipeline system, offering third-party access.

Import terminals for liquefied natural gas currently under construction are expected to hit a 10-year high at 144 million tonnes per annum of capacity in 2020 to prepare for increasing LNG demand in the years ahead.

China Gas Holdings, the largest independent Chinese city-gas distributor and owner of 555 filling stations for gas-powered vehicles, posted a surge in fiscal first-half net profits and had over US$3.5 billion in revenues as Beijing’s “Blue Skies” anti-pollution policies helped increase natural gas use and LNG imports.

Yantai Port Group, the Chinese cargo transportation, warehousing and harbour management company in the northeast province of Shandong just south of Beijing, plans to take part in up to three liquefied natural gas storage and terminal projects to be completed between 2022 and 2025.

Chinese liquefied natural gas imports rose 25 percent in March compared with the same month a year ago and the nation has also begun to improve its natural gas storage facilities to help meet peak demand.

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.