LNG

Little room would be left for US LNG imports to China if the country were to take the full 50 Bcm/y capacity of the Power of Siberia 2 gas pipeline, analysts suggest. If CNPC was to absorb the full throughput of the proposed gas interconnector, Gazprom could dent 42-45% of Chinese gas imports by 2040.

Gazprom shareholders have just held their annual general meeting and despite Western sanctions wiping out profits in the past year and leading to a net loss, one of the world’s largest gas companies has started rebuilding new markets to replace the European Union.

Chinese liquefied natural gas imports for the two-month January-February 2024 period soared by more than 23 percent from a year earlier as prices declined and demand grew during a time that encompassed the Lunar New Year holidays in China.

Asian liquefied natural gas demand is projected to increase in 2024 led by China even amid competition facing gas-fired power from electricity generated in the region by coal and with more pipeline gas heading for the Chinese border from Russia.

Gazprom, the Russian pipeline gas and LNG provider looking for other markets after being frozen out of the West over the Ukraine invasion, said it had significantly increased pipeline flows to China National Petroleum Corp. (CNPC) in line with existing supplemental agreement.

Oct 25 (LNGJ) - Russian natural gas company Gazprom is paying an increasingly high price for sanctions over the Ukraine invasion by Russia and has now lowered the corporate investment programme for 2023 from 2.30 trillion roubles ($24.4 billion) to 1.99 trillion roubles ($21.5Bln) because of “the change in macroeconomic indicators and the market situation” generally.

   “We provided for the reduction of revenues from gas sales in the new budget version due to the decline in market prices of gas in the first half of 2023. However, this is appropriately recognised in our operating costs - the total effect from their optimisation will be over one trillion roubles ($10.6Bln),” said Gazprom Deputy Chief Executive Famil Sadygov. “I would like to note we continue implementation of key projects. In particular, the comprehensive development of the ‘Power of Siberia’ gas pipeline and its backbone fields and expansion of the Yamal gas production centre,” added Sadygov.

Russian natural gas giant Gazprom has found another outlet for its resources stranded by Western sanctions over the war with Ukraine by signing new supply deals with the Central Asian republics of Uzbekistan and Kazakhstan.

Gazprom signed an agreement with Uzbekistan to supply gas volumes and also signed an accord with Kazakhstan’s QazaqGaz to provide services for the transportation of Russian natural gas through Kazakhstan to customers in Uzbekistan while also promising more volumes to the Kazakhs.

The two-year agreement will provide 9 million cubic metres per day, or around 2.8 billion cubic metres per annum, of pipeline natural gas to Uzbekistan.

Oil focused

Uzbekistan is an oil and natural gas producer, though its output leans mostly towards oil.

The overall deal is for the transit of 6 Bcm of gas annually, which implies that other Central Asian countries may also come to import more Russian gas via this route.

The details of the natural gas supply deal were revealed on October 7 at a ceremony attended by Russian President Vladimir Putin, Uzbekistan President Shavkat Mirziyoyev and Kazakhstan President Kassym-Jomart Tokayev.

The search for new pipeline gas customers by Gazprom has continued after Western sanctions on pipeline gas to Germany and the European Union, though there were no specific sanctions on LNG and cargo deliveries continue.

The Gazprom-operated Sakhalin LNG plant in the Russian Far East lost Shell as a shareholder but Japanese shareholders remained on board as they rely on the more than 9 million tonnes per annum of deliveries to Japanese terminals.

Kazakhstan is the largest southern neighbour of Russia in Central Asia and Uzbekistan lies to the south of Kazakhstan.

There is also a Central Asian natural gas pipeline in the region that is connected to China and supply flows to the Chinese are increasing year-on-year,

China pipeline

The pipeline supplying the Chinese from the west originates on the Turkmenistan-Uzbekistan border and passes through Kazakhstan on the 3,665 kilometres (2,277 miles) route to Horgos in the Xinjiang region of China.

A statement on the Gazprom deal with Uzbekistan and Kazakhstan said that the “blue fuel” from Russia would be sent to Uzbekistan via Kazakhstan, with a share of it also going to Kazakhstan. 

“Firstly, this is an important factor in the energy security of our country and the entire region. Secondly, the supply will provide for additional volumes of gas for the uninterrupted supply to economic sectors and the population,” said the President of Uzbekistan Shavkat Mirziyoyev.

According to Mirziyoyev, the implementation of this project was a “vivid example” of successful mutually beneficial cooperation between Russia, Kazakhstan and Uzbekistan in the energy sector.

“The implementation of this project will have obvious benefits for all three countries. Uzbekistan will get an additional source of energy, allowing it to guarantee an uninterrupted supply of heat and electricity to households and socially important facilities. Kazakhstan will be able to solve the issue of gasification of its northern and eastern regions,” said Gazprom 

Chinese liquefied natural gas imports increased by more than 34 percent last month with additional cargoes pointing at North Asia from the US, Qatar and Australia and with the percentage boosted by the much lower level of deliveries reported in August 2022 because of Covid-19 lockdowns in the main cities of China.

Deliveries of LNG to China’s growing network of import terminals amounted to 6.32 million tonnes, or 93 cargoes, in August 2023 compared with 4.72MT, or 70 cargoes, in August 2022, an increase of 34.1 percent, according to data from the Chinese General Administration of Customs.

Imports to Chinese network of 25 regasification terminals in the January-to-August period of 2023 came to 45.51MT, up by 14.5 percent from the 40.64MT reported in the first eight months of 2022.

Main suppliers

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

Chinese energy imports in August from Russia, mostly oil and gas, increased 13.3 percent from a year earlier to $11.52 billion.

China also receives varying volumes of pipeline gas through links from the former Soviet republics of Turkmenistan, Kazakhstan and Uzbekistan, 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.

Gas supply from the “Power of Siberia” pipeline reached just over 5 billion cubic metres in 2020, then 10.4 Bcm in 2021 and rose to 15 Bcm in 2022.

The volumes of Russian pipeline gas deliveries to China in 2023 are expected to reach around 22 Bcm.

Crude oil

China's crude oil production, processing and imports registered strong expansion in August, the Chinese data showed.

The country produced 17.47MT of its own crude oil last month, up 3.1 percent year on year.

China's total imports of crude oil stood at 52.8MT, a jump fo 30.9 percent from August 2022.

The data also shows that the country processed 64.69MT of crude oil at refineries in the same period, an increase of 19.6 percent.

China had imported an average of 11.4 million barrels of crude oil per day in the first half of 2023, a 12 percent increase from 2022’s annual average of 10.2 million barrels a day.

The Chinese sourced much of the additional crude oil it imported in the first half from Russia, Iran, Brazil and the US. 

Compared with 2022 averages, China’s imports from Russia increased by 23 percent (400,000 b/d), from Saudi Arabia by 7 percent (130,000 b/d) and from Brazil by 49 percent (250,000 b/d).   

Chinese liquefied natural gas imports increased in June by almost 24 percent as energy demand recovered because of lower prices and more regasification capacity coming on line, though LNG deliveries were less than in the previous month.

Chinese liquefied natural gas imports in March 2023 rose by almost 16 percent as demand showed its most significant monthly increase in 14 months.