China adds oil growth to its number two rank in global LNG imports

BY Maritime Executive 

U.S. crude oil exports in 2017 were nearly double those of 2016, and China accounted for 202,000 b/d (20 percent) of the 527,000 b/d total increase.

As a result, China surpassed the U.K. and the Netherlands to become the second-largest importing destination. However, similar to previous years, Canada remained the top destination for U.S. crude oil exports. Canada’s share of total U.S. crude oil exports continued to decrease in 2017, down from 61 percent in 2016 to 29 percent.

U.S. crude was shipped to 37 destinations, compared with 27 in 2016. Many European nations are among the largest destinations for U.S. crude oil exports, including the U.K., Netherlands, Italy, France and Spain. India, which did not receive U.S. crude oil exports in 2016, received 22,000 b/d in 2017, tying with Spain as the 10th-largest destination.

U.S. crude oil exports grew to an average of 1.1 million barrels per day (b/d) in 2017, the second full year since restrictions on crude oil exports were removed. Increased production and expanded infrastructure made it possible.

Crude oil now makes up 18 percent of total U.S. petroleum exports, making it the third-largest petroleum export after hydrocarbon gas liquids (HGL), such as propane, and distillate fuel. Before the restrictions on domestic crude oil exports were lifted in December 2015, most of the growth in U.S. petroleum exports was petroleum products – mainly HGLs, distillate fuel, and motor gasoline. Previously, crude oil’s largest share of total U.S. petroleum exports was 13 percent in 1999, when total volumes of U.S. petroleum exports were less than 1.0 million b/d, which was much lower than the 6.3 million b/d total in 2017.

Increasing U.S. crude oil production and expansions of U.S. pipeline capacity and export infrastructure facilitated increased crude oil exports. U.S. crude oil production reached 9.3 million b/d in 2017, a 0.5 million b/d increase from 2016. Several new or expanded pipelines came online in 2017 to move crude oil from producing regions, primarily the Permian basin of Texas and New Mexico, to the U.S. Gulf Coast. On the U.S. Gulf Coast, recently expanded crude oil export infrastructure in ports such as Corpus Christi and Houston, Texas, and in ports along the Mississippi River in Louisiana allowed larger volumes of crude oil exports.

A larger discount of domestic crude oil prices, represented by West Texas Intermediate (WTI) crude oil, to international crude oil prices, represented by Brent, reflects these dynamics. Spot Brent crude oil prices averaged $3.36 per barrel (b) more than WTI prices in 2017 compared with just $0.40/b more in 2016, providing a price incentive to export U.S. crude oil into the international market.

Similar production, infrastructure and price conditions will be necessary for U.S. crude oil exports to continue increasing. The Energy Information Administration’s March Short-Term Energy Outlook forecasts U.S. crude oil production to increase by 1.4 million b/d in 2018 and the Brent-WTI spread to average $3.96/b.


From Oil & Gas 360

China Continues Transition to NatGas, Ranks Second in LNG Imports

In 2017 China surpassed South Korea to become the world’s second-largest importer of LNG, according to data from IHS Markit and official Chinese government statistics, the EIA said. Driven by government policies designed to reduce air pollution, LNG imports increased by 1.6 Bcf/d in 2017, with monthly imports reaching 7.8 Bcf/d in December 2017.

China has been striving to transition away from dirty coal-fired electricity – natural gas is a cleaner alternative and the recent hike in worldwide production has lowered prices. China has also implemented policies in the colder northern provinces to use natural gas-fired boilers, this heats residential households while reducing air pollution.

China Continues Transition to NatGas, Ranks Second in LNG Imports

Global Oil and Gas Production
Source: Federal Reserve Bank of Dallas

Natural gas storage capacity in China is relatively limited and is estimated at just 3% of total natural gas consumption, the EIA said. During seasonal peaks for high demand, the supply of natural gas is sourced either via pipeline from Central Asia, or by LNG shipments. While domestic production and pipeline imports have increased in 2017, natural gas shortages throughout the country have led to record LNG imports in the winter of 2017.

In 2017, natural gas imports accounted for 40% of China’s supply, and over half of the natural gas imports were made up of LNG.

China Continues Transition to NatGas, Ranks Second in LNG Imports

Source: IHS Markit, China National Development and Reform Commission, China Customs, National Bureau of Statistics

Terminals and statistics

China has a total of 17 LNG import terminals at 14 ports along its coastline. While the utilization rate at the LNG import terminals was approximately 50% from 2013 through 2016, the rate skyrocketed to 69% in 2017. According to the EIA, natural gas consumption is expected to continue to increase, with import capacity expected to reach 11.2 Bcf/d in 2021. In addition, natural gas imports via pipeline are expected to increase, especially when the Power of Siberia pipeline from Russia comes online by the end of 2019.

The United States saw a dramatic increase of LNG exports to China in 2017 from previous years, jumping from roughly 17.2 Bcf in 2016 to 103 Bcf in 2017. In November 2017, China and the U.S. signed several preliminary agreements for U.S. LNG exports to China, including exports from Sabine Pass on the Gulf Coast of Louisiana, Delfin LNG’s offshore export project off of Louisiana’s coast and the proposed Alaska LNG project.

China Continues Transition to NatGas, Ranks Second in LNG Imports

China’s NatGas Infrastructure

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