China National Offshore Oil Corporation (CNOOC) sold two liquefied natural gas (LNG) cargoes on a local exchange for the first time, just as China emerged from severe gas shortages this winter, during which industrial gas users had to divert supplies to residential customers.
CNOOC sold a 60,000-ton LNG cargo for delivery in July and a 30,000-ton cargo for November delivery at an auction on the Shanghai Petroleum and Gas Exchange, Reuters reported, quoting an official at the exchange.
"Interest in the auction was very strong," the official told Reuters, adding that 18 bidders took part in the auction. The prices for the LNG volumes-all of which sold within 30 minutes-were "relatively low" compared to what the market had expected, said the official who declined to disclose the exact prices.
CNOOC could hold another LNG auction next month, according to the official at the Shanghai exchange.
The Chinese drive to burn more gas instead of coal left residents in the north freezing in a cold snap in early December, prompting China to backpedal on the coal ban in some areas to ease natural gas shortages. Ahead of the longest holiday period in China-the Lunar New Year in the middle of February, the country was gobbling up LNG cargoes from all over the world as it was trying to avoid severe natural gas shortages. This resulted in China becoming the world's second-largest LNG importer in 2017, outpacing South Korea and second only behind Japan, the EIA said in February. Chinese LNG imports surged 46 percent last year.
Related: Is Saudi Arabia's Geopolitical Pivot Good For Oil?
Today's volumes sold are negligible compared to China's enormous natural gas thirst.
Yet, industrial buyers could use the LNG auctions to lock up supplies at favorable prices ahead of next winter's heating season, according to Reuters.
The auctions could also help boost liquidity on the Shanghai Petroleum and Gas Exchange, which was created in 2015, and which the Chinese were hoping that could develop into a gas price benchmark for the Asian markets.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More