Chinese LNG Importers Expand Commercial Footprint

Chinese LNG importers have begun setting up or expanding trading offices in London and Singapore to better manage their growing and diversified import portfolios in an increasingly volatile global market.

The expanding commercial footprint puts Chinese importers in direct competition with global heavyweights such as Shell, BP, Equinor and Total Energies in a market that doubled in size to $450 billion last year, according to the International Energy Agency.

About a dozen Chinese companies have strengthened their business units or opened new offices, among which the private gas company ENN and the state-owned China National Offshore Oil Corporation (CNOOC) were the last to open offices in London, while the utility China Gas Holdings opened operations. In Singapore, according to company representatives and dealers, Reuters reported.

Increased LNG Contracts and Plans for Import

Dealers and analysts said Chinese gas importers have also increased long-term LNG contracts with suppliers in Qatar and the US by about 50% from the end of 2022 to more than 40 million tons per year, with plans to import more volumes from the two countries as also from the Sultanate of Oman and Canada and Mozambique.

“We will see a qualitative shift for Chinese companies from being importers rather than exporters to becoming major trading partners internationally and locally,” said Toby Cobson, head of global trading at Trident LNG in Shanghai.

Cobson said state-owned companies PetroChina, Sinopec, Sinochem Group and SinoC are actively trading to capitalize on their long-term portfolios.

Competition between Beijing and Tokyo

China is competing with Japan to become the world’s largest LNG importer, but it is not clear how much of the surplus or other volumes could be available for sale to Chinese companies.

Last year, PetroChina International imported or processed about 30 million tons of LNG. The company is the trading arm of PetroChina and China’s largest gas trader with a global team of 100 people in Beijing and four other international offices.

Zhang Yaoyue, head of global LNG trading at PetroChina International, declined to comment on the company’s trading volumes, but said trading is part of the company’s overall strategy.

“Supply security remains the core of our business, and trading capacity helps us better cope with market volatility,” Zhang said.

By 2026, Chinese companies are expected to enter into contracts to import more than 100 million tons of LNG per year.

Butin & Partners, a consulting firm, says this could mean a surplus of up to 8 million tons this year, while pricing agency ICIS estimates it would mean a shortfall of 5-6 million tons.

In any case, the increase in domestic production in China, combined with the increase in pipeline gas supplies from Central Asia and Russia, provides a sufficient amount of basic fuel reserves that Chinese gas companies can trade or exchange with US and other commodity portfolios when the arbitrage begins or when it will be appropriate, on the market.

“I can expect China to become a seasonal seller in regions like Southeast Asia, South Korea and Japan, as well as Europe,” said Jason Fair, head of business intelligence at Bottin & Partners.

US LNG contracts are FOB and open source with no destination restrictions, and energy consultancy Rystad Energy expects the US to account for a quarter of China’s long-term contracts by 2030.

As for Qatar, which will become the largest supplier to China in 2026, it provides traditional LNG contracts that are limited to one destination or country.

Changing Market

The Russian invasion of Ukraine last year forced European buyers to increase their LNG imports by two-thirds to offset the Russian gas that came to them through pipelines, and this led to an exit for companies with existing reserves, while Chinese, Japanese and South Korean companies took advantage of this opportunity in light of high prices. The global market value of LNG has doubled.

Ver said that European users are reluctant to sign long-term contracts because of their countries’ decarbonization goals.

During the spring and summer, Asian gas traders and importers ship LNG to Europe to fill storage tanks.

PetroChina International also signed a 20-year agreement in May to operate a regasification plant in Rotterdam, a first for a Chinese company in Europe.

Expansion of Retail Space

The opening of the market and the easing of restrictions on the domestic gas market have prompted Chinese gas distributors and small importers to expand their commercial space.

For example, a China Gas Holdings executive told Reuters that the company, which has signed contracts for about 3.7 million tons of LNG per year from the US, is working on hiring the first two clients for a new office in Singapore and is looking forward to signing new contracts. contracts.

The company joins ENN, Beijing Gas, Zhejiang Energy and Gofu Energy to establish a commercial presence in the energy hub of Southeast Asia.

“Compared to Japanese firms, the Chinese are more enthusiastic about expansion, and PetroChina International and Unipec are among the top payers, offering packages comparable to large international companies” as they look for talent to hire, the Singaporean recruiter said.