• 5 minutes Global Economy-Bad Days Are coming
  • 8 minutes IT IS FINISHED. OPEC Victorious
  • 14 minutes Venezuela continues to sink in misery
  • 17 minutes Could Tesla Buy GM?
  • 2 hours Paris Is Burning Over Climate Change Taxes -- Is America Next?
  • 3 hours OPEC Cuts Deep to Save Cartel
  • 4 hours What will the future hold for nations dependent on high oil prices.
  • 4 hours Price Decline in Chinese Solar Panels
  • 5 hours And the War on LNG is Now On
  • 1 min How High Can Oil Prices Rise? (Part 2 of my previous thread)
  • 9 hours Alberta Cuts Push Prices Too High
  • 1 day Congrats: 4 journalists and a newspaper are Time’s Person of the Year
  • 1 hour USGS Announces Largest Continuous Oil Assessment in Texas and New Mexico
  • 2 days Permian Suicide
  • 2 days End of EV Subsidies?
  • 2 days GOODBYE FOREIGN OIL DEPENDENCE!!

Breaking News:

Total To Boost Exploration In Mauritania

Alt Text

The Biggest Threat To Australia’s LNG Sector

Australia, one of the world’s…

Alt Text

China Determined To Avoid Another Natural Gas Crisis

Determined to avoid a natural…

Tim Daiss

Tim Daiss

I'm an oil markets analyst, journalist and author that has been working out of the Asia-Pacific region for 12 years. I’ve covered oil, energy markets…

More Info

Trending Discussions

The End Of The Status Quo In LNG Markets

Chinese state-owned oil and gas giant PetroChina is planning to replace its oil-linked long-term LNG contracts with shorter, more flexible deals, a senior company official said late last week as it announced is 2017 financial results.

PetroChina Vice Chairman and President Wang Dongjin said that existing oil-linked long-term contracts from Qatargas, Yamal and Gorgon, will not be renewed. S&P Global Platts Analytics said that contracts for a combined total of 14 million tons per annum (mtpa) will expire over the 2025-2038 period.

Last year, China became the world’s second largest LNG importer, after Japan, effectively bypassing South Korea. China’s increased gas usage comes as Beijing ramps up its goal of replacing coal with cleaner burning natural gas for electrical power generation and also industrial usage. The government mandates that at least 10 percent of the fuel used to meet energy demand be comprised of natural gas, with further earmarks set for 2030.

Chinese LNG imports averaged 5 billion cubic feet per day (Bcf/d) in 2017, exceeded only by Japanese imports of 11 Bcf/d. Imports of LNG by China, driven by government policies designed to reduce air pollution, increased by 1.6 Bcf/d (46 percent) in 2017, with monthly imports reaching 7.8 Bcf/d in December, according to a February 23 U.S. Energy Information Administration (EIA) report.

In the long term, China’s share of global LNG demand is expected to converge with that of Japan, S&P Global Platts Analytics added. China’s requirements are also growing, as its contracted obligations rise much more slowly than its demand projections, meaning Chinese importers will play an increasing role in global LNG market fundamentals and prices. Related: Permian Drillers Prepare For Double-Digit Cost Jump

Currently, China has 17 LNG import terminals at 14 ports along its coastline, with a combined regasification capacity of 7.4 Bcf/d, according to the EIA.

Unstoppable LNG market shifts

PetroChina’s move is yet another sign that global LNG markets are still undergoing profound fundamental shifts, albeit being revolutionized amid a historic supply overhang of the super cooled fuel.

Moreover, expect even more changes to unfold as extra supply hits the market from Australia, which will soon have as many as ten major LNG export projects operational, bypassing Qatar either later this year or next year to become the largest LNG producer in the world.

By the end of the decade, the U.S. will become the world’s third largest LNG producer when it will have five major LNG export projects operational, with that number to increase substantially in the mid-2020's as a so-called second wave of U.S.-LNG export project development kicks in. Related: Can The U.S. Break Russia’s Gas Monopoly In Europe?

In essence, despite what producers claim (including Qatar, which will ramp up LNG production from 77 mpta to 100 mtpa within the next five years), markets will reach equilibrium and even enter a period of undersupply after 2022 or soon thereafter, there seems to be no turning back to the old model when LNG buyers were at the mercy of producers and restrictive long term 20 and even 30-year off-take agreements. Going forward, LNG will increasingly trade more like a true liquid commodity, similar to iron ore and even crude oil.

Also, on Thursday PetroChina reported 4.8 billion yuan (US$766.9 million) in net profit in the fourth quarter of 2017, the worst quarterly result last year and down from 6.7 billion yuan in the third quarter. However, total revenue rose to 558 billion yuan in the three-month period, compared with 482 billion yuan in the previous quarter.

Huang Lili, an analyst with CITIC Securities, attributed the lower earnings to losses due to LNG imports in the fourth quarter when China suffered massive gas shortages.

These supply shortfalls came in large part due to Beijing’s rapid and arguably premature push to replace more coal usage with natural gas, just as harsh winter temperatures set in. China’s increased winter gas usage sent LNG spot prices in Asia to three years highs, breaching the $11/MMBtu mark at the end of last year. Since then, however, prices have trended downward as warmer temperatures set in. In trading last week, spot prices for May delivery LNG-AS slipped to about $7.10/ MMBtu, 60 cents below levels from the previous week, said several trade sources surveyed by Reuters.

By Tim Daiss for Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage

Trending Discussions


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News