China Increases Dependence on LNG as Energy Source
China’s consumption of liquefied natural gas (LNG) is projected to surge in 2023 as the economy continues to recover, according to industry experts. Data from BloombergNEF reveals that LNG imports in China will likely surpass 70 million metric tons, a YoY increase of 11%. Other research firms such as Rystad Energy, Wood Mackenzie, and Independent Commodity Intelligence Services predict China’s demand for LNG will be between 70-72 million tons in 2023, a 9-14% increase from the previous year.
The LNG trade is expected to expand rapidly in the near future worldwide, especially in emerging markets as they grow and industrialize. The BP Energy Outlook 2023 states that the majority of the growth will be driven by the growing demand for natural gas in China, India, and other Asian nations as they transition away from coal.
China is now the dominant force in the LNG market, accounting for 40% of the recent long-term LNG contracts among global players. State-owned enterprises like China National Offshore Oil Corp and China Petrochemical Corp (Sinopec) are leading the country’s expansion of its LNG capacity, while private companies are also actively building LNG terminals.
The Chinese energy firm, ENN Group, recently signed a contract with Texas-based Energy Transfer to buy 2.7 million tons of liquefied natural gas (LNG) every year for 20 years. Additionally, they increased their purchasing agreement with NextDecade, another Texas-based firm, to buy 2 million tons of LNG per year for 20 years.
In just two years, China tripled its purchases of LNG through long-term contracts, with contracts worth nearly 50 million tons per year signed in 2021 and 2022. This is up from the annual volume of roughly 16 million tons from 2015 to 2020. However, China’s demand for natural gas in 2022 has decreased due to the impact of the pandemic on industries.
China has been prioritizing a transition away from coal and has been constructing LNG infrastructure, including terminals and storage facilities. The total turnover capacity of LNG receiving stations in China is 97.3 million tons per year, with CNOOC leading with 29.4% of the country’s total capacity. Sinopec is building LNG terminals in several regions and has plans to expand its LNG handling capacity to 40.3 million tons per year by the end of 2025.
CNOOC is also accelerating the construction of its LNG terminals, planning to build two new terminals and expand four existing ones, as well as creating a sharing platform to provide terminal services. LNG is becoming the preferred choice for maritime vessels as it can reduce carbon emissions by 25%. CNOOC has also started providing ship-to-ship refueling services for LNG-powered ships.