The Next Wave of Chinese LNG Importers - GTI · Non-NOC LNG importers fall into three main categories Citygas distributors Have existing downstream markets Want to reduce supply cost
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The Next Wave of
Chinese LNG Importers
ZHOU Xizhou 周希舟
Managing Director – Asia Power, Gas, Coal & Renewables
IHS Markit
Key implications
• The rise of non-NOCs in China’s wholesale natural gas supply are creating new dynamics
in the global LNG market. Several Chinese non-national oil companies (NOCs) have procured
LNG supply agreements and successfully imported cargoes. Many more companies are building
or proposing new LNG receiving terminals.
• Together, China’s non-NOCs will present significant opportunities for suppliers. These
companies vary from large end users and citygas distributors seeking to minimize their gas
procurement costs to energy companies looking for new market opportunities.
• However, further reforms are required to allow new players to fulfill their potential.
Instituting non-discriminatory infrastructure access, removing policy barriers to downstream
market, and relaxing price regulation are critical areas.
Note: China refers to mainland China in this presentation.
Recent policies and market fundamentals support
Chinese non-NOCs’ LNG import activities
Note: TPA = third-party access.
Source: IHS Markit
Key drivers supporting Chinese non-NOC LNG imports
© 2019 IHS Markit
Non-NOC LNG imports
Midstream TPA policy
Mixed-ownership policy
Supply security policy
Global market supply availability
Policy related
Market related
Multiple Chinese non-NOCs already own and operate
LNG terminals
61.8
9.2
0
10
20
30
40
50
60
70
80
MMt
NOCs Non-NOCs
China’s operating LNG receiving capacity (end-2018)
Note: The operating capacity does not account for equity shares in each project.
Source: IHS Markit © 2019 IHS Markit
Mil
lio
n m
etr
ic t
on
s (
MM
t)
Sh
are
in
to
tal im
po
rts
87%
13%
Share
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
In 2018, non-NOC LNG imports approached 3 MMt, but
the share remains small compared with the NOCs
1.1%
1.9%
3.0%
4.3%
5.5% 5.4%
0%
1%
2%
3%
4%
5%
6%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2013 2014 2015 2016 2017 2018
Huadian
China Gas
Beijing Gas
Pacific Oil & Gas
ENN
Guanghui
JOVO
Shenergy
Share of in total LNG imports
China's non-NOC LNG imports by company
Note: Shenergy holds a majority share in the Shanghai Yangshan LNG terminal. However, cargoes received at this terminal are mostly from CNOOC's term supply and are not counted in this graph.
Source: IHS Markit © 2019 IHS Markit
MM
t
Sh
are
in
to
tal L
NG
im
po
rts
Shaded: TPA cargos
Non-NOC LNG importers fall into three main
categories
Citygas distributors
Have existing downstream markets
Want to reduce supply cost and increase supply security
Large gas consumers
Have own gas demand, e.g., gas-fired power generators
Want to reduce supply cost and increase supply security
Opportunists
May have access to energy users that may switch to gas
Look for new opportunities to expand existing business
Source: IHS Markit
Key categories for non-NOC LNG importers and sample players
© 2019 IHS Markit
Shenergy, ENN, Guanghui,
Zheneng, Beijing Gas, China
Gas, Shenzhen Gas,
Guangzhou Gas
Huadian,
Yudean
JOVO, Sinoenergy, Beijing
Energy, Baota, Hanas, Poly-
GCL, Pacific Oil & Gas
Infrastructure accessibility and rigid pricing regulation are two
major impediments for non-NOCs
Domestic pricing regulations
Domestic market affordability
Pipeline access
Downstream market access
Credit worthiness
LNG industry experience
Source: IHS Markit
Challenges remain for non-NOC LNG importers
© 2019 IHS Markit
Issues shared with the NOCs Issues specific to the non-NOCs
0
5
10
15
20
25
30
Jan
-18
Fe
b-1
8
Ma
r-1
8
Ap
r-18
Ma
y-1
8
Jun
-18
Jul-
18
Au
g-1
8
Se
p-1
8
Oct-
18
Nov-1
8
Dec-1
8
Landed LNG import price
Most LNG imports face financial losses
Notes: Shanghai citygate and wholesale LNG prices are net of value-added tax and regas cost to be
comparable with landed cost of LNG imports.
Source: IHS Markit © 2019 IHS Markit
US
do
lla
rs p
er
MM
Btu
Range of coastal wholesale LNG market
prices: High and volatile, but only apply to
users who need gas in liquid form or do
not have enough piped gas access
Shanghai
regulated
citygate
price
Non-NOCs’ regas terminal capacity is expected to more
than triple by 2025 China’s non-NOCs’ regas terminals (end-2018)
61.8 66.6
91.7
9.2 13.8
28.9
0
20
40
60
80
100
120
End-2
018
End-2
020
End-2
025
NOCs Non-NOCs
China's LNG capacity outlook
Source: IHS Markit © 2019 IHS Markit R
eg
as c
ap
acit
y (
MM
t)
Sh
are
in
to
tal cap
acit
y
87% 83% 76%
13% 17% 24%
End-2
018
End-2
020
End-2
025
0%
20%
40%
60%
80%
100%
120%
Qidong Phase 1 & 2
Qidong Phase 3
IHS Markit Customer Care
CustomerCare@ihsmarkit.com
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