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Oil & Gas 360

Oil & Gas 360

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The First U.S. LNG Shipment To China Arrives

LNG

The fist LNG shipment to China from the lower 48 states arrived last week, marking the official entry of the U.S. into the Asian LNG market. The shipment was chartered by Royal Dutch Shell (ticker: RDS) and originated form Cheniere Energy’s (ticker: LNG) Sabine Pass LNG facility in the Gulf of Mexico. The cargo was purchased by China National Offshore Corp as part of a long term contract, and was delivered to the Yantian Port near Hong Kong last week.

The Maran Gas Apollonia was the 19th cargo of LNG to load from the Sabine Pass export facility in the U.S. Gulf of Mexico, but the first to reach northeast Asia since the first loading in February this year.

The cargo traversed the newly improved Panama Canal to reach China, and was the first LNG tanker to transit the newly expanded canal. Improvements to the Panama Canal have allowed larger ships, once incapable of navigating the canal, to circumvent the trip around Cape Horn at the tip of South America and reach the Pacific Ocean through Panama.

World’s Largest LNG Market: Asia

The Asian LNG market is the largest in the world. The top five importers of LNG in 2015 were all located within this market segment, with Japan, South Korea, China, India, and Taiwan comprising the top five. Two-thirds of LNG imports were received by these countries in 2015, with China as the world’s largest energy consumer, this shipment represents a new target for U.S. natural gas supplies. U.S. LNG exporters are actively planning for more shipments to China, and marketing LNG to Japan and South Korea.

China’s LNG imports were up 21 percent year-to-date over last year in the first six months of 2016 to 11.5 million tons. Australia and Qatar were the leading two suppliers, according to China’s General Administration of Customs. Chinese government officials have said they want to increase the ratio of natural gas in the country’s total energy mix to 10 percent from the current 5 percent by 2020. Related: What Iraqi’s Support For An OPEC Freeze Means For Oil

In Japan and South Korea, two of the largest importers of LNG in the world, demand has decreased slightly due to such factors as a decline in overall power demand and an increasing reliance on coal. However, many buyers have already signed contracts to take LNG from suppliers for the next decade or more and the demand dip isn’t expected to alter existing contracts.

Two U.S. LNG cargoes have reached ports in Europe already, with one delivering LNG in Portugal and the other to Spain.

Cheniere’s Sabine Pass facility put a second train in operation at the end of July, and it is expected that more cargo will leave Sabine Pass in the near future headed to Europe. As activity ramps up at the facility, more U.S. LNG will be available to the global market.

About the time train one was completed in late April, Bloomberg reported that the Sabine Pass terminal “has received almost 35.4 billion cubic feet of natural gas since pipeline deliveries to the facility were first reported on Oct. 23.”

By Oil & Gas 360

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