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China is experiencing a natural gas shopping frenzy, and officials focus on importers continuing to strike deals even after the global energy crisis subsides.

The government continues to support efforts by state-owned buyers to sign long-term contracts and even invest in export facilities, in order to boost energy security through the middle of the century, according to people who held meetings with policymakers.

China is on its way to becoming the world’s largest LNG importer in 2023.

“Energy security has always been a priority for China. Having ample supply in their portfolio allows them to manage future volatility, and I expect to see more,” said Toby Copson, global head of trading and advisory at Trident LNG in Shanghai.

The deal-making efforts will help support global export projects and enhance the role seaborne fuels will play in the energy mix. As suppliers move to court Chinese importers, Beijing’s influence in the market is set to increase.

China began its plan to acquire long-term contracts in 2021, after improved relations with the United States. While imports fell last year in part due to weak demand amid Covid restrictions, Chinese buyers renewed their turn after the invasion of Ukraine cut the pipeline to Europe.

Many importers, including India, are looking to sign more deals to avoid future shortages and reduce reliance on spot deliveries, yet China is closing contracts at a much faster pace. So far this year, 33% of long-term LNG volumes signed have gone to China, according to Bloomberg calculations.

And last month, the state-owned China National Petroleum Corporation struck a 27-year deal with Qatar and took a stake in the massive expansion of the resource, while ENN Energy Holdings signed a multi-decade contract with US developer Cheniere Energy. Supplies from both contracts are scheduled to begin as early as 2026.

And there are more deals in the offing as negotiations stretch from boardrooms from Singapore to Houston. State-owned giants, including Cnooc and Sinopec, are in discussions with the United States.

Traders said Qatar was in talks with several Chinese buyers about sales contracts that could last for more than 20 years.

The deals will help fuel nearly a dozen new import terminals that are set to begin construction across China’s coastal cities this decade. The country’s LNG imports could rise to 138 million tons by 2033, about double current levels, according to Norwegian consultancy Rystad Energy.

For his part, Shi Nan, an analyst at Rystad, said: “Currently, more than half of China’s LNG demand for the period from 2030 to 2050 is still without contract.”

However, an upward demand outlook is uncertain, especially as China boosts gas production at home, while onshore shipments from Russia could rise if new pipelines are built. Cnoon senior analyst Qi Zhuguang warned that oversupply increases the risk that LNG import terminals may be shut down more frequently.

2023-07-02 12:30:29
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