China’s niche LNG buyers plan billion-dollar investments, double imports amid reforms

China could buy a record 67 million tons of LNG this year as factory and household demand surges. (AFP)
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Updated 23 October 2020

China’s niche LNG buyers plan billion-dollar investments, double imports amid reforms

SINGAPORE: A group of niche Chinese gas firms is set to make waves in the global market with plans to invest tens of billions of dollars and double imports in the next decade as Beijing opens up its vast energy pipeline network to more competition.

The companies, mostly city gas distributors backed by local authorities, are ramping up purchases of liquefied natural gas (LNG) as newly formed national pipeline operator PipeChina begins leasing third parties access to its distribution lines, terminals and storage facilities from this month.

The acceleration in demand in what is already the world’s fastest-growing market for the super-chilled fuel is a boon for producers such Royal Dutch Shell, Total and traders like Glencore faced with oversupply and depressed prices.

Just last month, UK’s Centrica signed a 15-year binding deal to supply Shanghai city gas firm Shenergy Group 0.5 million tons per year of LNG starting in 2024.

“They’re very, very interested in imports — we’re talking to a lot of them already,” said Kristine Leo, China country manager for Australia’s Woodside Energy, which signed a preliminary supply deal with private gas distributor ENN Group last year.

China could buy a record 65-67 million tons of LNG this year and is expected to leapfrog Japan to become the world’s top buyer in 2022. Imports could surge 80 percent from 2019 to 2030, according to Lu Xiao, senior analyst at consultancy IHS Markit.

State-owned Guangdong Energy Group, Zhejiang Energy Group, Zhenhua Oil and private firms like ENN were quick to take advantage of the market reforms and low spot prices for LNG, said Chen Zhu, managing director of Beijing-based consultancy SIA Energy.

Their imports will reach some 11 million tons this year, up 40 percent versus 2019, more than 17 percent of China’s total purchases, said Chen.

For years such companies have worked to expand a domestic consumer base among so-called “last mile” gas users like tens of millions of households, shopping malls and factories, but they had to rely on state majors for supplies.

With greater access to distribution networks, they are now incentivized to build their own import terminals that could account for 40 percent of the country’s LNG receiving capacity by 2030, versus 15 percent now, Chen said.

Frank Li, assistant to president of China Gas Holdings, a private piped gas distributor, said his company has been in talks with PipeChina for infr structure access as it prepares to import LNG next year.

In Southern China’s industrial hub Guangdong, companies like Guangzhou Gas, Shenzhen Gas and Guangdong Energy hold small stakes in LNG facilities operated by China National Offshore Oil Company. They imported their first cargoes from these terminals last year.

Guangzhou Gas is set to import 13 LNG shipments this year, up from five last year, after “tough negotiations” with CNOOC won it access to terminals, said Vice President Liu Jingbo.

“The reform is bringing us diversified supplies, helping us cut cost,” Liu said.

Some companies also plan to beef up trading expertise by opening offices overseas, such as in Singapore, executives said.

“Naturally, companies will be thinking of growing into a meaningful player globally,” said a trading executive with Guangdong Energy, adding that his firm looks to Tokyo Gas , Japan’s top gas distributor and trader, as a model.

The rise of niche players will erode some market share held by state giants CNOOC, PetroChina and Sinopec, prompting them to scale back gas infrastructure investment and focus on global trading, while extending into retail gas distribution at home, officials said.


Egypt expects economic growth between 2.8 and 4% in 2021

Updated 29 November 2020

Egypt expects economic growth between 2.8 and 4% in 2021

  • Unemployment indicators also reflected the economy's development

CAIRO: Egyptian Finance Minister Mohamed Maait said the country was reaching positive growth rates, calling it a great achievement in light of the global conditions brought on by the coronavirus pandemic.

Maait said the estimated rate of economic growth in the fiscal year 2021-2022 would reach between 2.8 and 4 percent.

He said the percentage varied according to how each person perceived it sectorally, and that industries such as tourism and aviation were significantly affected by the spread of the disease.

“We have a priority to make room for the private sector’s participation in development projects,” the minister added.

He explained that there would be strengthened cooperation with the Transport Ministry in implementing its projects in partnership with the private sector.

Egypt had been hoping for growth between 6 and 6.5 percent before the coronavirus crisis broke out.

The country topped the emerging market economies in containing the rate of inflation during the current year, according to data from the Egyptian cabinet, despite the global repercussions of the health emergency.

The International Monetary Fund (IMF) said that Egypt achieved the largest annual decline in the inflation rate in emerging markets in 2020, compared to 2019, with a decline of 8.2 percentage points.

Among the effects of the economic reform plan were inflation rates falling to 5.7 percent during 2019-2020, compared to 13.9 percent in 2018-2019.

Unemployment indicators also reflected the economy's development. 

Recent data from the Egyptian Central Agency for Public Mobilization and Statistics showed the unemployment rate declining to 7.3 percent in the third quarter of this year, compared to 7.8 percent a year ago.

Egypt's monetary reserves rose to $39.22 billion by the end of last October, according to the country's central bank.

The IMF said the performance of the Egyptian economy exceeded expectations.