China’s LNG imports surge to record amid winter crunch

Bloomberg

China’s imports of liquefied natural gas in November surged 53 percent to a record as the nation scrambles to meet fuel shortages amid peak winter demand and government’s drive to cut coal use.
LNG imports rose 53 percent from the same month last year to 4.06 million metric tons, according to data posted on the website of the General Administration of Customs. Shipments in the first 11 months of the year are up 48.4 percent. Pipeline gas imports advanced 27.4 percent to 2.5 million tons. “Terminal operators have been maximizing their capacities to import as much as they can,” Liu Guangbin, an analyst with SCI International, said before the data release.
The world’s largest energy user is facing a winter supply crunch after demand surged this year amid President Xi Jinping’s fight against smog, which has focused on cutting the use of coal in favor of cleaner-burning gas. Parts of the country started facing shortages just two weeks into winter, with Hebei and Shandong pro-inces in the north and central Hubei reporting supply shortfalls last month and curtailing supplies to businesses and factories in order to keep homes warm.
Spot LNG prices in Northeast Asia rose this week to $10.90 per million British thermal units, the highest in three years, according to industry publication World Gas Intelligence. The National Development & Reform Commission, China’s top economic planner, last week reiterated its call for gas suppliers including China National Petroleum Corp. and China National Offshore Oil Corp. should speed up LNG imports to meet winter demand.
Then China’s President Xi Jinping decided to make clearing smoggy skies a key part of his agenda. Government agencies converted millions of homes and tens of thousands of factories from coal to gas this year. LNG imports jumped by 48 percent over the first 10 months of the year, putting China on the verge of passing South Korea to become the world’s second-largest importer after Japan.
At the same time, construction problems have delayed some new production projects, such as Inpex Corp.’s Ichthys and Royal Dutch Shell Plc’s Prelude in Australia, said Graeme Bethune, CEO of consultant EnergyQuest. Several LNG developments in the US have also been pushed back to 2019 from next year, he said.
“Conventional wisdom said there would be a tsunami of new LNG coming that will force down LNG prices,” Bethune said. “Instead, moves by China are boosting prices. The question going forward is how much of these elevated prices are due to secular reasons and how much is due to seasonal demand.”

SHRINKING GLUT
China’s rising need for gas, as well as new demand from emerging markets spurred by lower prices, mean that a forecast glut of the fuel next year may be smaller and end sooner than earlier forecast. That’s an incentive for exporters to reconsider projects that have been delayed or canceled.
“The strength of global LNG demand growth has surprised in 2017, and that could happen again in 2018,” Australia’s Woodside Petroleum Ltd. said in a statement. “That indicates that both LNG suppliers and LNG buyers are going to have to get to work to underpin new LNG supply projects, perhaps sooner than some expected.”
Most LNG demand is either from power and industrial use that is relatively flat through the year, or residential use that peaks in the winter when homes need to be heated.