China smashes LNG growth record (again) in 2018 – what changed

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04 February 2019

China smashes LNG growth record (again) in 2018 – what changed

Report summary

• China's LNG imports increased by 15.6 Mt in 2018, breaking the previous world record it set just one year ago. • Chinese buyers have returned to contracting in a significant way, driven by the need to improve short-term supply security and to hedge long-term uncertainty in domestic supply ramp-up. Meanwhile, China became much more active in spot procurement to balance the market. • The high growth was achieved despite higher import costs. Yet, there a mixed mood on gas demand emerged towards the end of 2018. • We expect LNG demand to moderate somewhat in 2019 but will still see demand growth of nearly 9 Mt, ensuring it will continue to shape the global market.

Table of contents

  • Highlights
    • China breaks LNG growth record again and overtakes Japan as the largest gas importer
    • No repeat of last winter’s gas supply shortages, and China probably overbought LNG for winter
    • Policy reaffirms support for long-term gas growth while shifting near-term focus to domestic production and infrastructure
    • Chinese buyers much more active in term contracting than in 2017
    • Contracted imports increase but spot purchases double
    • The US-China trade war had a limited short-term impact
  • LNG shipping
    • CNOOC slows market share decline
    • CNPC/PetroChina returned to contracting in a significant way
    • Sinopec ended its overcontracted position and resolved many marketing challenges
    • Trucked LNG players tested the water
    • Trucking supports LNG demand growth
    • Storage facilities slightly improved, but still not enough
    • Northern terminals remained stretched
    • Third-party access progressed slowly
    • LNG demand increased despite higher import prices, thanks to the overwhelming priority to secure winter supply and gas pricing reforms
    • Nevertheless, gas users started to feel the heat of higher gas prices in winter; concerns over affordability have re-emerged
    • The relative competitiveness between LNG and pipeline imports reversed in 2018
    • Volatility of trucked LNG prices less dramatic due to improved winter supplies and leaner supply chain
    • The slowdown in demand could deepen
    • Pipeline supply potential
    • Next step on the reform agenda – will we see a national pipeline company?

Tables and charts

This report includes 15 images and tables including:

  • China LNG imports by supply basin
  • China LNG imports by supply basin (tonne-miles)
  • China LNG imports by average distance travelled
  • China LNG imports by supply basin (tonne-miles)
  • LNG demand growth in 2018 by region
  • Monthly LNG imports 2016-2018
  • LNG supply structure 2017-2018
  • Spot LNG purchase in 2018
  • China LNG imports by supply country/region
  • Monthly imports into the three NOCs’ terminals
  • Terminal utilisation
  • LNG imports value and average import cost
  • LNG import cost by supply source 2018
  • Delivered costs to coastal markets' city gate: LNG imports versus piped imports
  • Comparison of gas prices in Hebei province (northern China)

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