CHINESE LNG DOWN
Chinese imports of liquefied natural gas (LNG) declined by 1.1% year-on-year in 2015 for the first time since China began importing LNG in 2006. Chinese LNG imports have grown steadily in the last 10 years, from 0.1 billion cubic feet per day (Bcf/d) in 2006 to 1.3 Bcf/d in 2010, and have more than doubled since then. They reached their peak in 2014 at 2.7 Bcf/d, making China the third-largest LNG importer globally after Japan and South Korea. In 2015, however, LNG imports declined to 2.6 Bcf/d, reflecting in part a slowdown in the growth of the Chinese economy and lower prices of competing fuels.
At the end of 2015, China had 13 LNG regasification import terminals with a combined capacity of 5.4 Bcf/d. Several more terminals are under construction, with a combined capacity of 3.4 Bcf/d. These terminals are scheduled to come online in 2016-19. However, the start-up of several terminals has been delayed because of a lack of downstream demand. For example, construction of Jieyang LNG terminal in Guangdong was completed last year, but the terminal has not been connected to a provincial pipeline network serving end users. The terminal's end users are factories that can also run on liquefied petroleum gas (LPG). Current LPG prices are lower than long-term contractual LNG prices, so LPG is being used to meet the demand. Additionally, many contracts to supply LNG at the new regasification terminals were signed when oil prices were above $100/barrel, which makes long-term LNG prices less competitive than both spot LNG and LPG. Major Chinese oil and gas companies have been trying to postpone shipments of contracted LNG to the new terminals and instead purchase lower-priced spot cargoes.
In November 2015, the Chinese government lowered the ceiling for citygate natural gas prices for nonresidential sectors by $2.95 Million British thermal units (MMBtu), a decrease of approximately 28%. Lower prices are expected to stimulate natural gas demand growth going forward, particularly in the power generation and transportation sectors.
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