PetroChina, the Chinese state-owned energy group, is building new liquefied natural gas import terminals even though it has yet to secure the long-term supply for them, writes World Gas Intelligence today . This relatively new development illustrates the company’s confidence that supplies will be there when it needs them and its unwillingness to pay today’s high prices for long-term contracts when spot prices are at $4.30 per million British thermal units (mbtu) in the US, the most liquid spot gas market.
Here is what WGI has to say:
PetroChina is progressing rapidly on LNG receiving terminal projects along China’s eastern coast, even though it lacks sufficient firm contracted supply to fill these terminals. This appears to reflect the big state firm’s willingness to invest in order to obtain gas supply flexibility — and its unwillingness to accept high prices in order to tie up further term supply.
PetroChina currently has plans for four terminals. Two are under construction: the 3.5 million ton per year (460 million cubic foot per day) Rudong Yangkou project in Nantong city in Jiangsu province, and a 3 million ton/yr facility in Xingang in the port of Dalian in northeastern Liaoning province. Both are slated for completion next year, and an official told WGI that term imports will commence in 2012.
“It’s not a big problem if it [Petrochina] does not have sufficient supply to fill up the terminals, as it’s cheap to build regas facilities,” Aik says. She reckons that PetroChina had to ink its first few contracts — despite high prices at the time — in order to get government approval for the terminals and accelerate its LNG expansion.
At home, PetroChina is facing tough competition from rival China National Offshore Oil Corp. (CNOOC), a first mover on importing LNG into China, as the two battle to expand their gas market share along the coast. CNOOC chief Fu Chengyu said over the weekend that it expects to get Beijing’s nod for three new terminals this year and aims to sign at least three new long-term supply deals.
But those terminals will not be ready soon enough to soak up some of the extra supply that is likely to hit the market by mid year as Qatar brings on new gas and the western hemisphere’s spring brings with it a drop in demand fort natural gas used in heating homes and businesses. With the US awash in domestic gas, that means the new gas will most likely land on Europe’s shores, increasing pressure on suppliers such as Algeria, Russia and Norway, says Jonathan Stern, analyst at the Oxford Institute for Energy Studies.
