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In Rare Move, Beijing Orders Gas Importers To Share Infrastructure

Chinese authorities have ordered state gas importers to share their infrastructure in a bid to avoid another gas shortage like the one it experienced in the winter of 2017.

In December 2017, several million people in northern China were left without heat because there was not enough gas in the region, and the transportation network was far from complete.

Now, this network is much closer to launch, and Beijing needs to make sure there will be no more shortages. Therefore, China has instructed Sinopec, which owns the biggest LNG import terminals network, to share them with peers CNOOC and CNPC, Bloomberg reports.

CNOOC and CNPC need to use Sinopec's facilities not because they don't have their own--it's because their own storage is full. The level of LNG supply in storage earlier this year prompted CNOOC and CNPC to declare temporary force majeure on LNG imports.

A recent Reuters report suggested that Chinese gas buyers may slow down on the buying soon: a source told the news agency that as many as 40 to 45 U.S. LNG cargos for delivery in August could be canceled, after the same number of cargos for July delivery was canceled earlier. The reason: slower than expected gas demand recovery, notably in Asia.

Amid changes in demand patterns, Beijing is pressing ahead with the reform of the natural gas sector. The three state gas importers currently operate 10 LNG import terminals. However, the government has set up a new company, dubbed PipeChina, which will manage the terminals along with the new gas distribution network across the country. 

Meanwhile, following the lockdown, LNG imports were on the rise again, as Chinese importers took advantage of record-low spot market prices. Now, with storage filling up, this growth may slow down again.

By Irina Slav for Oilprice.com

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