December 2021
China’s consumption of LNG has only grown over the last several years, and Chinese import demand promises to overtake that of current world leader Japan within the decade. AME currently pegs China’s maximum regasification and receival capacity at 80Mtpa, though the nation only consumed 68Mt in 2020.

With an overall regas terminal utilisation rate of 83% in 2020, China’s utilisation is one of the highest in the world, behind only the far smaller Belgium

With utilisation so high and energy so scarce in China right now, it comes as no surprise that the nation is continuing to rapidly expand its gas import capacity. Chinese imports are expected to grow nearly 50% to 100Mt in 2025-2026, and the country’s rapid expansion, recent state company restructuring and continued investment in LNG display confidence that the need for power generation and the flexible energy supplied by natural gas will persist long into the future.

From Torch to Bonfire

China’s regasification capacity has grown rapidly over the last decade, from 12Mtpa in 2010 to 80Mtpa in 2020, and is targeted to double to 160Mtpa by 2030. While Covid-19 put a damper on construction, the recovery of the Chinese economy proceeded well in the first half of 2021, and estimated GDP growth for the nation rose back into the 6-8% range.

More recently, however, limitations in the energy market have put a damper on economic growth and on the willingness of investors to commit to the new projects originally expected for the year. With that in mind, the expected regas terminal utilisation of 2020-2021 is forecast to represent a peak as capacity begins to roar ahead of the available supply in the next few years, as the Chinese economy recovers from a double whammy of energy restriction and the pandemic that has robbed it of some of its titanic momentum.

On the other side of the Pacific, the US’s massive upcoming LNG liquefaction output is already being moved on by Chinese importers, with Sinopec and Uniper forging contracts with the US’s Venture Global to offtake a total of 7Mtpa of LNG for 20 years from 2024.

Lighting the Way

Construction design for China’ LNG receiving terminals has tended towards moderate, mid-sized facilities of 5-7Mtpa capacity, with a good spread along the eastern coast from Liaoning in the far north to western Guangdong in the south. New terminals under construction, however, have committed to bulk, with large receiving capacities and large storage tanks.

Large, extensive facilities with over 10Mtpa are becoming increasingly popular in China. One example is the Tangshan II facility, initially planned to come online in 2022 at 7Mtpa and expand in 2023 to 12Mtpa, along with the expansion at the original Tangshan I facility nearby from 6.5Mtpa to 10Mtpa.

The largest upcoming projects – Tangshan II, expansions to Qingdao, and Yantai Shandong – are concentrated in highly populated northern regions, close to facilities available from Russian fields in Vladivostok. Transmission of energy supply is a major concern for Chinese industry due to continuing high demand, and the location of regasification terminals must be carefully selected to best facilitate both ship accessibility and transit to local power stations.

Beacons On the Path

The 2019 creation of the China Oil & Gas Pipeline Network Corporation, also known as PipeChina, has restructured the way China handles its pipeline networks. The company has taken responsibility of five existing and upcoming LNG receiving terminals and has been managing the delivery network of gas pipelines. The other two largest state companies, CNOOC and CNPC, hold primary ownership in what are promising to be the largest sites, but the majority of small to mid-sized sites are held privately or by provincial-level operations companies.

New sites are constructing berthing that is capable of serving a wide range of carriers. While LNG shipping globally is coalescing towards a preference for mid-sized LNG carriers of 125,000-175,000m3, Chinese sites are preparing for a full range of carriers, including Qatar’s massive Q-max ships.

Stocking for the Night

Storage capacity has been a focus for China recently, and current project developments could see underground storage equating to as much as 16% of China’s annual LNG demand becoming available in the nation, significantly more than the 5% present in 2018. AME estimates that China’s LNG use will total 131Mt in 2030, so the storage available would total nearly 21Mt of LNG, or 29bn cubic metres of natural gas once returned to a gaseous state.

This is a large quantity of gas to store long-term, nearly the full capacity of the major northeastern ‘Power of Siberia’ pipeline for a year, but it remains below the capacity of other top consumers such as the United States or Russia, who retain roughly 20% of their annual usage in storage capacity.

And then there comes the question of every bureaucratic meeting: what does it all cost? Regas capacity increases in China are competing with renewables for funding, and they seem to be winning. While not quite as capital-intense as the multi-billion-dollar behemoths that are liquefaction and export facilities, a large LNG receiving facility (10+Mtpa) can cost a significant amount. In 2019, costing estimates by Pokkatt and Srinivasan noted regasification plant building capital in the order of USD$1bn per one billion cubic feet of daily capacity, or roughly 7.6Mtpa.

Given the 80Mtpa size of the expansions being undertaken by the communist giant, estimates of US$10-11bn to be spent on receiving terminals over the next decade are reasonable. By comparison, renewable energy subsidies in 2021 amounted to just over US$900m, predominantly in Inner Mongolia. While not all new terminals are publicly funded, their construction represents a significant outlay into energy security for the nation.

Spreading Embers

China’s regas capacity is a massive market that is continuing to grow rapidly. Despite competition from renewables, LNG is retaining and growing its share of China’s energy supply. With the government facilitating the world’s fastest growth in receiving capacity, AME expects China to surpass Japan’s actual LNG imports before the end of the decade, though it will still be behind on maximum capacity.

The nation’s continued investment in LNG is paying dividends at a time of significant energy shortfall. Despite sky-high prices, the critical loss of power in the December quarter of 2021 has only encouraged China to find secure, stable and reliable energy sources – all things LNG can provide, if the country is willing to continue to invest.