Newly-established state-owned PipeChina has begun leasing third-party access to its terminals, storage facilities, and distribution networks since this month as the central piece of China’s gas market reform. This reform is expected to spur LNG imports and tens of billions of dollars in investment from a group of niche Chinese gas firms, mostly local government-backed city gas distributors.
State-owned Guangdong Energy Group, Zhenhua Oil, Zhejiang Energy Group, and private companies are expected to increase their LNG imports to 11 million tons in 2020, surging by 40% from 2019 and accounting for 17% of China’s total imports, analysts said. Greater access to distribution lines and an established consumer base will likely motivate these companies to build their own import terminals. Currently, these companies contribute to 15% of the country’s LNG receiving capacity. It will grow to 40% by 2030, analysts said.
In Guangdong province, companies like Guangdong Energy, Guangzhou Gas, and Shenzhen Gas began their LNG imports this year after securing access to CNOOC-operated LNG facilities. Some of them also plan to establish representative offices overseas, such as in Singapore, for international expansions. The rise of these niche players will likely erode market shares of state-owned giants Sinopec, CNOOC, and PetroChina. They are expected to shift focus on global trading and domestic retail gas distribution while reducing investment in new facilities.
On the other hand, the reform is a boon for gas companies and traders such as Total, Shell, Glencore, and others. An executive with Australia’s Woodside Energy said the company had held talks to a lot of Chinese companies interested in importing LNG. In September, UK’s Centrica agreed to supply 0.5 million tons/year of LNG to Shanghai city gas firm Shenergy Group for 15 years starting in 2024.
