The Next Wave of

Chinese LNG Importers

ZHOU Xizhou 周希舟

Managing Director – Asia Power, Gas, Coal & Renewables

IHS Markit

Key implications

• The rise of non-NOCs in China’s wholesale natural gas supply are creating new dynamics

in the global LNG market. Several Chinese non-national oil companies (NOCs) have procured

LNG supply agreements and successfully imported cargoes. Many more companies are building

or proposing new LNG receiving terminals.

• Together, China’s non-NOCs will present significant opportunities for suppliers. These

companies vary from large end users and citygas distributors seeking to minimize their gas

procurement costs to energy companies looking for new market opportunities.

• However, further reforms are required to allow new players to fulfill their potential.

Instituting non-discriminatory infrastructure access, removing policy barriers to downstream

market, and relaxing price regulation are critical areas.

Note: China refers to mainland China in this presentation.

Recent policies and market fundamentals support

Chinese non-NOCs’ LNG import activities

Note: TPA = third-party access.

Source: IHS Markit

Key drivers supporting Chinese non-NOC LNG imports

© 2019 IHS Markit

Non-NOC LNG imports

Midstream TPA policy

Mixed-ownership policy

Supply security policy

Global market supply availability

Policy related

Market related

Multiple Chinese non-NOCs already own and operate

LNG terminals

61.8

9.2

0

10

20

30

40

50

60

70

80

MMt

NOCs Non-NOCs

China’s operating LNG receiving capacity (end-2018)

Note: The operating capacity does not account for equity shares in each project.

Source: IHS Markit © 2019 IHS Markit

Mil

lio

n m

etr

ic t

on

s (

MM

t)

Sh

are

in

to

tal im

po

rts

87%

13%

Share

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

In 2018, non-NOC LNG imports approached 3 MMt, but

the share remains small compared with the NOCs

1.1%

1.9%

3.0%

4.3%

5.5% 5.4%

0%

1%

2%

3%

4%

5%

6%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2013 2014 2015 2016 2017 2018

Huadian

China Gas

Beijing Gas

Pacific Oil & Gas

ENN

Guanghui

JOVO

Shenergy

Share of in total LNG imports

China's non-NOC LNG imports by company

Note: Shenergy holds a majority share in the Shanghai Yangshan LNG terminal. However, cargoes received at this terminal are mostly from CNOOC's term supply and are not counted in this graph.

Source: IHS Markit © 2019 IHS Markit

MM

t

Sh

are

in

to

tal L

NG

im

po

rts

Shaded: TPA cargos

Non-NOC LNG importers fall into three main

categories

Citygas distributors

Have existing downstream markets

Want to reduce supply cost and increase supply security

Large gas consumers

Have own gas demand, e.g., gas-fired power generators

Want to reduce supply cost and increase supply security

Opportunists

May have access to energy users that may switch to gas

Look for new opportunities to expand existing business

Source: IHS Markit

Key categories for non-NOC LNG importers and sample players

© 2019 IHS Markit

Shenergy, ENN, Guanghui,

Zheneng, Beijing Gas, China

Gas, Shenzhen Gas,

Guangzhou Gas

Huadian,

Yudean

JOVO, Sinoenergy, Beijing

Energy, Baota, Hanas, Poly-

GCL, Pacific Oil & Gas

Infrastructure accessibility and rigid pricing regulation are two

major impediments for non-NOCs

Domestic pricing regulations

Domestic market affordability

Pipeline access

Downstream market access

Credit worthiness

LNG industry experience

Source: IHS Markit

Challenges remain for non-NOC LNG importers

© 2019 IHS Markit

Issues shared with the NOCs Issues specific to the non-NOCs

0

5

10

15

20

25

30

Jan

-18

Fe

b-1

8

Ma

r-1

8

Ap

r-18

Ma

y-1

8

Jun

-18

Jul-

18

Au

g-1

8

Se

p-1

8

Oct-

18

Nov-1

8

Dec-1

8

Landed LNG import price

Most LNG imports face financial losses

Notes: Shanghai citygate and wholesale LNG prices are net of value-added tax and regas cost to be

comparable with landed cost of LNG imports.

Source: IHS Markit © 2019 IHS Markit

US

do

lla

rs p

er

MM

Btu

Range of coastal wholesale LNG market

prices: High and volatile, but only apply to

users who need gas in liquid form or do

not have enough piped gas access

Shanghai

regulated

citygate

price

Non-NOCs’ regas terminal capacity is expected to more

than triple by 2025 China’s non-NOCs’ regas terminals (end-2018)

61.8 66.6

91.7

9.2 13.8

28.9

0

20

40

60

80

100

120

End-2

018

End-2

020

End-2

025

NOCs Non-NOCs

China's LNG capacity outlook

Source: IHS Markit © 2019 IHS Markit R

eg

as c

ap

acit

y (

MM

t)

Sh

are

in

to

tal cap

acit

y

87% 83% 76%

13% 17% 24%

End-2

018

End-2

020

End-2

025

0%

20%

40%

60%

80%

100%

120%

Qidong Phase 1 & 2

Qidong Phase 3

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