• 3 days Statoil Changes Name
  • 4 days Nuclear Bomb = Nuclear War: Saudi Arabia Will Develop Nuclear Bomb If Iran Does
  • 4 days Tillerson just sacked ... how will market react?
  • 3 days Russian hackers targeted American energy grid
  • 4 hours Country With Biggest Oil Reserves Biggest Threat to World Economy
  • 4 days Petrobras Narrows 2017 Loss, Net Debt Falls Below $85bn
  • 3 days Is $71 As Good As It Gets For Oil Bulls This Year?
  • 4 days Proton battery-alternative for lithium?
  • 4 days Ford Recalls 1.38 Million Vehicles (North America) For Loose Steering Wheel Bolt
  • 3 days Oil Boom Will Help Ghana To Be One Of The Fastest Growing¨Economies By 2018!
  • 4 days I vote for Exxon
  • 4 days South Korea Would Suspend Five Coal - Fire Power Plants.
  • 3 days HAPPY RIG COUNT DAY!!
  • 4 days UK vs. Russia - Britain Expels 23 Russian Diplomats Over Chemical Attack On Ex-Spy.
  • 4 days Why is gold soooo boring?
  • 3 days Spotify to file $1 billion IPO
Which Oil Major Has The Best Investment Strategy?

Which Oil Major Has The Best Investment Strategy?

With oil markets having recovered,…

Increased Oil Hedging Hints At Permian Production Boom

Increased Oil Hedging Hints At Permian Production Boom

Increased hedging activity among US…

China’s CNOOC Spends Big In Panic Hoard of LNG


Chinese state-owned company CNOOC, the country’s largest importer of liquefied natural gas (LNG), has leased two tankers to store emergency LNG supplies offshore, spending US$10 million on the plan, as China’s massive coal-to-gas switch leads to an unprecedented soaring gas demand and concerns of fuel shortages this winter.

“It’s like buying insurance to cover winter demand spikes,” a trading source with knowledge of CNOOC’s tanker lease deal told Reuters.

Last year, CNOOC hired one tanker to hoard LNG supply, the source said, but noted that this year it is the first time that two tankers have been hired.   

“CNOOC arranged [to lease the two tankers] months ago anticipating the shortage will be severe this year,” the source told Reuters.

The lease of an LNG tanker is very expensive, as is keeping the gas cooled, so the cost of holding such tanker is much higher than keeping crude oil in storage.

While one could make the business case for storing LNG for later sale in case of a market contango, when prompt prices are lower than future prices, the current Asian spot LNG curve is in the opposite state of contango—backwardation—with LNG for January delivery nearing almost $10 per million British thermal units (mmBtu), while April delivery prices are at just over $7 per mmBtu.

The expensive leases of the LNG tankers and the uneconomic stashing of the fuel is proof of the unusual moves that China’s biggest LNG importer has made to cover winter shortages, according to Reuters.

Related: Don’t Expect Aggressive U.S. Shale Drilling

Earlier this week, China’s state planning commission ordered eight Chinese regions to “regulate” surging gas prices amid winter heating demand and the switch to gas from coal. Last week, Asia’s LNG spot prices jumped to the highest since January 2015 due to the Chinese demand and strong oil prices. 

China’s imports of LNG between January and October this year soared by 47 percent compared to the same period last year, according to Platts. 

Even with surging LNG imports, Chinese regions in the north have been experiencing gas supply shortages in recent weeks, due to China ramping up efforts to move from coal to gas, and to a cold spell in the country.

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:

Join the discussion | Back to homepage

Leave a comment

Leave a comment

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