U.S. supplies give China muscle to become major force in global LNG trade

China Gas Holdings

13/02/2022 23:39

(Repeats story published on Friday with no changes to text)
    By Chen Aizhu and Marwa Rashad
    SINGAPORE/LONDON, Feb 11 (Reuters) - Chinese firms are set
to become a major trading force in the global liquefied natural
gas market in coming years, thanks to liberalisations at home
and recently signed long term contracts for record amounts of
LNG from U.S. suppliers.
    Setting their sights beyond the domestic market, state-run
Sinopec Corp  0386.HK , Sinochem Group, privately-controlled ENN
Natural Gas Co  600803.SS  and China Gas  0384.HK  are building
up trading teams from Beijing, Singapore to London.
    China's push into the international LNG market comes two
decades after it made a similar big splash in oil trading, and
will put its firms in competition with established players like
Shell  SHEL.L , TotalEnergies  TTEF.PA  and Vitol.
    Fortunately, the pie is growing. By 2027, analysts forecast
spot trade in LNG will be $20 billion, more than double its 
2020 value.
    Last year, China's imports soared by 18% to a record 79
million tonnes, overtaking Japan as the world's largest LNG
buyer. China's economic recovery from the COVID-19 pandemic was
one factor, but the other was a pipeline reform that allowed
more firms to become importers.
    Felix Booth, Head of LNG at Vortexa, drew parallels with the
way in which Japan's largest LNG importer, JERA, evolved from "a
large end-user to a powerful integrated portfolio player"
over the past decade.   
    "I foresee the Chinese national oil companies achieving a
similar transition at an accelerated pace, enabled by a
favourable market for long term supply of flexible cargoes and
growth of Chinese natural gas demand," Booth said.
    The size of the contracts signed with U.S. suppliers should
leave Chinese traders with ample amounts of LNG to trade on the
global market, after meeting domestic demand, said one
Beijing-based trader.
    Late last year, Chinese firms nL4N2Q513J signed up over 10
million tonnes a year of LNG with U.S. exporter Cheniere Energy
 LNG.A  and Venture Global nL1N2RG083, with supplies extending
through the mid-2040s' and provisions for flexibility in
marketing destinations for the bulk of the purchases. 
    Unipec, a trading arm of Sinopec that already rivals Vitol
as the world's top oil trader, is beefing up its LNG desks
outside China, having moved two Beijing-based staff to London
and added a third trader to its Singapore team late last year.
    "LNG now makes up less than a tenth in Unipec's turnover,
but it will be where the growth comes from in the future," said
a company executive, who declined to be named as he was not
authorized to speak to media.
    Signalling the impact of Unipec's growing presence in the
market, the firm's largest-ever sell tender nL1N2U615Y last
month led in part to a 36% fall in Asian spot prices this year -
though it has so far awarded a much smaller volume than the more
than 40 LNG cargoes for 2022 delivery that it originally sought.
    Chinese state energy major CNPC's new pipeline gas deal with
Russia is also expected to boost LNG sales in the spot market in
coming years.  urn:newsml:reuters.com:*:nL1N2UF0K1     
    "By having multiple pipelines from Russia, Central Asia,
along with their still growing domestic production, expanding
LNG portfolio, and increasing storage capacity they (Chinese
firms) will certainly have the ability to divert greater numbers
of cargoes into the spot and short-term markets," said Tamir
Druz, managing director at Capra Energy.    
    Chinaoil, the trading unit of state energy giant PetroChina
and by far the largest Chinese LNG merchant, last year traded
over 15 million tonnes outside China, emerging as a rival to
trading houses Vitol and Trafigura, said traders.
    ENN, China's first private city-gas distributor operating a
large receiving terminal for LNG, is another rising trader and
has boosted its trading team accordingly, having become the
first Chinese company to sign a major supply deal with a U.S.
firm since 2018.  urn:newsml:reuters.com:*:nL4N2R71UM 
    Analysts, however, said that Chinese companies' long-term
success hinges on whether they can better manage price risks,
build shipping capability and own a terminal asset in Europe. 


    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Global LNG exports surge to record highs in 2022 as Europe steps
up purchases    https://tmsnrt.rs/3uHAcyw
Europe has sharply increased LNG imports in 2022, while top
buyer China eyes more exports    https://tmsnrt.rs/3HEgeZg
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Chen Aizhu in Singapore, Marwa Rashad in London
and Marcy De Luna in Houston; Editing by Simon Cameron-Moore)
 ((aizhu.chen@thomsonreuters.com; Reuters Messaging:
aizhu.chen.reuters.com@reuters.net))