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China’s liquefied natural gas imports broke another record last month amid rising stockpiles that made some importers nervous, Reuters reports, citing industry sources as well as vessel-tracking data.
The January total reached 6.55 million tons, up by 2 percent from the previous record set in December. However, the winter turned out milder than would justify this massive intake of LNG and many importers are stranded with more LNG than they can’t sell.
“When people see these numbers, they think Chinese demand is up ... but actually it is causing a headache (for importers) as (they) have overbought and can’t find demand to absorb the cargoes,” one energy industry source told Reuters.
Imports of LNG rose substantially throughout 2018, by a whopping 41 percent, as China sought to prevent a repeat of the 2017 gas shortage that left several million households in northern China without heating as the government’s rush to replace coal with LNG for power and heating generation outpaced the development of distribution networks.
As a result of this precaution, now LNG traders in China are having to resell their cargoes at lower prices on the domestic market or contracting international buyers.
Meanwhile, domestic natural gas production is rising as well as imports but demand growth is set for a slowdown, according to an IHS Markit analyst. Part of the reason has to do with projections for a slowdown in Chinese economic growth, James Taverner told Reuters. Another reason is a slowdown in the pace of switching from coal to LNG-fueled power generation on worries about the security of supplies.
China’s total natural gas demand is expected to rise by 11.4 percent in 2019 over 2018, slower than the growth in previous years, according to analysts at the country’s largest oil and gas producer China National Petroleum Corporation (CNPC).
At the same time, the country will soon overtake Japan as the world’s largest LNG importer, despite a slowing demand growth pace. By 2022, China will be the country that consumes the most imported LNG.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.