China's LNG Demand the 'Great Unknown'
China's LNG import demand so far this year has been a lot higher than expected, with increases of 150% or more on the same month of 2016, according to official statistics.
Speakers told the CWC gas conference in Singapore September 20-21 that this was partly because of the rise in trucking LNG around the country, using ISO container tanks. There has also been a five or six fold increase in LNG-fuelled trucks to carry these tanks.
About a quarter of the imports reach the end-user in this way, according to Cnooc's president for trade and marketing Ye Yishu. None of these shipments is very large, but they are frequent and the quantity adds up if an end-user has 100 sites, said Shell's vice-president for Asia, Ajay Shah.
This has contributed to the rise in spot prices for northeast Asia, which has gone up $1.50/mn Btu in recent months. One industry source told NGW that the present price of $7.00/mn Btu would have looked very expensive until recently, but that it looked cheap compared with what could come this winter. He said there was a forecast gas shortage of some 5bn m³ during the winter.
Strong coal prices have also supported gas, said Wood Mackenzie's head of Asia-Pacific gas research Kerry-Anne Shanks, adding that there was not enough storage for winter demand, which implies more LNG imports.
On the downside, the industry will have to work harder to keep costs down, with more work still needed to keep shipping costs down. Although LNG is not fungible, that is changing as the new gas coming to market from the US and Australia are of a similar, lean quality, meaning that swap cargoes can save a lot of mileage, LNG-Worldwide's Pat Roberts, a former Shell LNG executive, told NGW.
She said that the market was becoming increasingly commoditised, like the metals market, losing its niche status and becoming a lot more cost-conscious as trading took over from long-term contracts.
Other cost-savings from shipping have come from new-build vessels, which use more efficient engines, better containment tanks and also hold more, giving economies of scale, said GTT's Stephane Maillard, Most of last year's new deliveries were between 170,000 and 180,000 m³, which is the top end of the Panama Canal width, compared with the existing average of 120,000 m³. He also mentioned the other new route for delivering LNG to market: that is, eastwards from Yamal in northern Russia, to China and Japan.
William Powell