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China needs new LNG import terminals so that the import pace can keep up with rising demand, according to a new report by S&P Global Platts.
Capacity at northern and eastern terminals is currently at 130 percent despite high prices from rising winter demand. Chinese players told Platts they were cautious about authorizing new shipments since the import terminals had reached bottlenecks and other constraints.
"There's a limit to how much [LNG cargoes] the companies can import, with their northern receiving terminals already running above full capacity," said one Chinese source. Another said shipping schedules are so "packed that it is hardly possible to take in more cargoes [but] we need to guarantee supply to pipelines, so it's very hard to divert gas away to take advantage of [high] trucked LNG prices."
One possible solution to the LNG shortage is transporting gas from southern regions to areas with high needs. But another source said this may be a logistical nightmare.
"The price gap between northern and southern regions is wide enough to move gas to the north, but the north is still short of gas every year," the source said. "The poorly built pipeline infrastructure connecting both ends can't afford a surge in winter gas demand.”
In July, the International Energy Agency (IEA) predicted that China would account for 40 percent of the global annual growth in natural gas demand over the next five years. Chinese imports of natural gas are running at record rates as Beijing pushes on with its cleaner energy agenda that should see the country satisfy 10 percent of its energy needs with gas in 2020, up from what was only 5.9 percent in 2015. In the first week of October, Asian spot LNG prices jumped to their highest level since January, driven by the Chinese gasification push, and were slightly higher than oil-linked LNG prices.
By Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on…