LNG

LNG use for transport is driving infrastructure investment in China, where the fleet of LNG-fuelled trucks nearly tripled over the past five years. Government data indicates, however, that utilities liquefy enough domestic gas to meet trucking demand – while battery electric trucks are about to outcompete LNG-fuelled ones.

China’s LNG imports to reach more than 83 million in 2025 – greater than the previous record-high in 2021, as per Rystad’s base case scenario. Shipments rose more than 20 percent year-on-year during the first four months of 2024 on the back of low LNG spot prices although substantial inventories and tepid demand slowed subsequent growth.

Chinese electric utilities prefer solar and domestic coal over gas for power generation. Capital costs for solar at $1.65 billion of an exemplary project are less than half of the $3.9 billion of a comparable gas power plant, though solar produces less energy annually due to its low capacity factor (~20 percent) compared to coal (~60 percent) and gas (~50 percent).

Comparing costs, the price of imported LNG to China is too high to materially displace coal. According to Chinese customs data, the average cost of imported LNG is nearly three times that of domestically produced coal and gas. It is also between 37 percent and 61 percent more expensive than pipeline gas imports from Russia and other Asian countries, not to mention distributed solar power.

Falling technology cost of solar PV spurs a fast build-out, and the actual installed RES capacity will most likely exceed the government’s target, especially in industrialised eastern China. LNG, in contrast, is too expensive on a cost basis to displace coal. In fact, it is renewables – not LNG – that displaces coal for power generation in China and much of Asia.

Coal generation is typically US$30-40 per MWh cheaper than gas-fired power generation, analysis by the Institute of Energy Economics and Financial Analysis (IEEFA) shows. Onshore wind and utility-scale solar are found to be “the cheapest power sources,” costing roughly half as much as gas-fired power generation.

Though LNG prices are set to fall in the coming years as more US liquefaction capacity comes to the market, IEEFA analysts anticipate “prices are unlikely to drop to levels that are competitive with coal or renewables.”

Wind power displaces thermal coal

In fact, China’s growing LNG imports have not reduced or slowed the expansion of its coal consumption. Since 2017, coal demand has increased more than LNG imports every year. In the electric power sector, which accounts for 60 percent of China’s total coal usage, the share of gas-fired power generation has remained at just 3 percent since 2015, while the share of wind and solar generation has quadrupled to 16 percent. Although coal-fired generation has increased during this time, its relative market share in the power mix has fallen from 70 percent to 61 percent.

“While coal has not been displaced in absolute terms, wind and solar have contributed more than gas to reducing coal’s share in the generation mix,” said Christopher Doleman, IEEFA’s specialist for LNG and natural gas. “Looking ahead, annual capacity additions of coal, wind, and solar will continue to exceed new gas-fired power capacity.”

Bearing in mind the government’s gas strategy aims to ensure that imports of pipeline gas and LNG do not rise above 50 percent of total energy consumption. 

Electricity demand in China approached the 10,000 TWh mark at the end of last year and keeps growing faster than GDP. Through to 2027, the IMF projects China’s GDP growth at around 4 percent while electricity demand is set to increase by a more robust 6 percent the International Energy Agency (IEA) highlights.

Australian oil and gas major Woodside has signed its maiden, long-term LNG sales agreement with China Resources. The Hong Kong-based company agreed to offtake 0.6 mtpa on a delivered basis for 15 years, starting from 2027.

LNG demand growth east of Suez exceeds regional supply, so Asian buyers have pulled some flexible Atlantic cargoes to tighten the market. Energy Aspects is bullish against JKM-TTF spreads over the balance of 2025, though call on cross-basin is lower this year as term cover in the top five Asian markets – China, Japan, South Korea, Taiwan and India – has fallen to 82 percent in 2025.

There were 1.94mmt of LNG on the water with destinations in China according to our market visibility at the time of writing on 31 March. These cargoes had an estimated delivery horizon of 30 April. None of these inbound cargoes had originated in the United States, whilst 0.77mmt were due from Qatar and 0.51mmt from Australia. Five cargoes totalling 0.35mmt were broadly headed for China but still had to declare their destination terminals.

Most LNG cargoes still in transit at the time of writing and with scheduled arrivals at specified ports in China were due to arrive in South China and amounted to 0.65mmt, led by Guangdong Dapeng LNG, which as a destination was followed by the Beihai LNG terminal. However, we highlight that cargoes tagged with the destination of ‘Guangdong Dapeng LNG’ have frequently been arriving at other Chinese terminals shortly after arriving in Chinese waters. Concurrently, the North China region was looking to receive roughly 0.44mmt, led by 0.23mmt headed for the Qingdao LNG terminal. Again, we caution that this declared destination might be misleading as the cargo may eventually arrive at one of the other terminals in North China. Meanwhile, anticipated LNG deliveries to East China amounted to 0.50mmt. Apparent demand there was led by 0.12mmt going to the Jiangsu LNG terminal at the time of writing, followed by Shanghai (Yangshan) LNG with 0.10mmt.

Seven LNG cargoes totalling 0.35mmt were broadly headed towards China but without specifying an arrival port. The shipments aboard the North Light, LNG Megrez, Maran Gas Agamemnon, Clean Ocean and Milaha Ras Laffan had an arrival horizon of 30 April. Three Russian vessels were carrying Yamal LNG cargoes that had previously been transferred at Murmansk whilst the Milaha Ras Laffan was transporting a Qatari cargo. The Maran Gas Agamemnon carried an Australia Pacific LNG contingent.

LNG Demand: China's liquefied natural gas requirements, despite their previous robustness, appear to be tempering in 2025.

Click to Download