Page 10 - GLNG Week 35

GLNG COMMENTARY GLNG

A storage glut may
lead to reduced spot
purchases of LNG
during the peak winter
demand period.

analyst, Sun Xuelian, was quoted by Bloomberg tonnes per year – of total regasification capac-
as saying. “The additional amount went under- ity, including 22.4mn tpy across 10 new import
ground as consumption growth flattened amid terminals.
the pandemic.” As its import capacity grows, China also
Now questions are being asked about what remains under pressure to ramp up purchases of
will happen to storage capacity and imports over US energy – including LNG – under the Phase
the remainder of this year – and in the immedi- 1 agreement struck between the two countries at
ate term. the start of this year in a bid to end the trade war
“There is a big question about whether between them.
demand will recover enough in September and Unsurprisingly, given the impact of COVID-
October to digest the almost-full gas storage 19 on demand, China is thus far falling short
while pipeline imports resume,” a Wood Mac- of the import targets set out in the agreement.
kenzie analyst, Miaoru Huang, was also reported Indeed, even before COVID-19 took hold, the
by Bloomberg as saying. “There will be no room target for energy purchases from the US was
for more injections to underground storage by considered so ambitious as to be unrealistic.
early September.” Since then, the pandemic has pushed the target
even further out of China’s reach.
What next? Panjiva, a unit of S&P Global Market Intelli- As its import
Compounding the storage crunch is the fact gence, estimated in August that Chinese imports
that China deferred some contracted supplies of US LNG during the first half of the year capacity grows,
of both pipeline gas and LNG during the peak totalled around $300mn. Also in August, Reu- China also
of its COVID-19 outbreak and lockdown. These ters estimated that China had bought only 5% of
volumes are set to come due over the winter, the targeted $25.3bn worth of energy products remains under
adding to the storage glut and further discour- from the US in the first six months of 2020.
aging additional purchases of LNG on the spot This shortfall, and worsening relations pressure to ramp
market. between the two countries more broadly, has
“Chinese importers, which are usually under led to concerns over the fate of the Phase 1 deal. up purchases
pressure to meet the surge of winter demand, Conversely, if the US and China keep working of US energy –
now may face pressure to sell in order to ease on restoring trade relations, this could lead to a
stockpiles,” an SIA Energy analyst, Liu Yue, an further rise in Chinese imports of US LNG. including LNG.
analyst with SIA Energy, was reported as telling The outlook for the remainder of 2020 and
Bloomberg. the start of 2021 is complicated by considerable
The start-up of new regasification capacity uncertainty over a number of areas – over the
is also boosting China’s LNG imports. Wood outcome of the US election, COVID-19 and
Mackenzie noted this week that China leads the LNG demand. The LNG industry will be hoping
way in regasification capacity additions – unsur- for a winter uptick in demand, but alongside the
prisingly, given that it is also the fastest-growing trends playing out in China, these hopes could
demand region. The consultancy estimates that be undermined by mild winter weather, as they
China accounts for over a third – or 52.6mn were last year.™

P10 www. NEWSBASE .com Week 35 04•September•2020