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China on a tear to expand domestic gas output and diversify its natural gas imports

China’s quest for natural gas

“China supports domestic enterprises to increase natural gas output and at the same time to diversify imports of the resource,” said spokesperson Gao Feng at a regular press conference, Hellenic Shipping News reported.

China’s natural gas import is expected to rise as new cross-border gas pipelines and liquefied natural gas terminals will be put into use, a Ministry of Commerce spokesperson said. Calling imports “a significant source” of China’s natural gas supply, Gao attributed increasing imports to rising domestic demand and the improvement of infrastructure facilities.

“Statistics from China’s customs showed that from January to October of this year, China’s natural gas imports rose 24.9 percent year on year to 54.165 million tonnes. Of the figure, liquefied natural gas (LNG) imports surged 47.7 percent to a record high of 29.092 million tonnes, Gao replied in response to a question on the ongoing natural gas shortage in northern China,” HSN reported.

China E&P finds gas offshore

CNOOC Limited (ticker: CEO) has discovered a mid-sized natural gas field, Bozhong 19-6, in Bohai Bay. The discovery is offshore—located in the southwest of Bozhong in average water depth of about 22 meters.

The discovery well was drilled and completed at a depth of 4,181 meters (13,717 feet) and encountered an oil pay zone with a total thickness of approximately 25 meters and gas reservoir(s) with a total thickness of about 348 meters. The evaluation well tested at 1,000 barrels of oil and 6.4 million cubic feet of natural gas per day.

“Bohai is the most important crude oil producing area to the company,” said CNOOC. “The crude oil produced in this region is mainly heavy oil. As of the end of 2016, the reserve and daily production volume in Bohai were 950.2 million BOE and 477,380 BOEPD, respectively, representing approximately 24.5% and 36.6% of the company’s total reserves and daily production, respectively.”

China’s Crying Need for NatGas—a Discovery in Bohai’s Shallow Water, LNG Demand Booming

The operation area in Bohai is mainly shallow water, with a depth of 10 to 30 meters
Source: CNOOC 

Xie Yuhong, executive vice president of CNOOC and general manager of the exploration department commented, “The natural gas field discovery of Bozhong 19-6 demonstrates the good prospects of buried hills for future gas exploration of Bohai Bay and lays a solid foundation for CNOOC’s quality clean energy supply for the Beijing-Tianjin-Hebei region.”

China’s Crying Need for NatGas—a Discovery in Bohai’s Shallow Water, LNG Demand Booming

CNOOC 2017 New Projects

In 2016, the company made seven successful discoveries in Bohai. In addition, the company successfully appraised 10 oil and gas structures. Among which, Kenli 16-1, Caofeidian 12-6/6-2, and Penglai 20-2/20-3 were proved to be mid-to-large sized oilfields after appraisals. Penglai 19-9, after comprehensive adjustment, commenced production in January 2017. Currently, there are a number of new projects under construction.

China imports more LNG due to winter demand, mandates to get off of coal

According to Reuters, CNOOC said it leased two off-coast tankers to store an emergency supply of LNG. The article goes on to state that China has converted the northern part of the country to burn cleaner natural gas instead of coal, the country’s most used fuel source. Additionally, the article said that 28 cities have converted to natural gas, consuming large amounts to fuel homes and factories.

China Daily said that the Hebei province lacks ten to twenty percent of current natural gas needs and estimates that January through September 2017 saw 167.6 billion cubic meters consumed in China, a 16.6 percent year-on-year growth. The publication also said that China may surpass South Korea to become the second largest LNG importer next year, with 230 billion cubic meters (Bcm) consumed this year – 20 billion Bcm was due to the coal-to-gas transition. Domestic LNG prices hit a record high of 9,000 yuan ($1,361) a ton on December 1, said China Daily.

China gas demand yields a first for Canada: FortisBC sends first cargo of LNG to China without an export terminal – pilot project uses container ships, not tankers, to move the liquefied gas

Canada chalked up a first in November when it exported its first LNG shipment to China.

The 950 gigajoules of gas, about 17 metric tons of LNG, was transported from Canadian company Fortis BC’s Tilbury plant in the Vancouver suburb of Delta. It was shipped by CIMC Enric Holding with container ships, according to reports in the China Daily.

“This export will be the beginning for British Columbia to export LNG to China on a large scale,” Michelle Mungall, the British Columbia minister of energy, mines and petroleum resources, said.

Compared with traditional transportation modes, a container shipment of LNG is more flexible and cost-saving by skipping the need to permit and build export and import terminals, according to CIMC ENRIC, which supplied the tanks. CIMC ENRIC, which reports it is the world’s largest supplier of cryogenic tanks, said that using portable tanks, LNG can be transported by sea and by land.


“This pilot is a small, but significant step for B.C.’s LNG export industry,” Douglas Stout, vice-president of market development and external relations at FortisBC pointed out.

China is now the world’s third largest LNG importer, and consultancy Wood Mackenzie believes China will surpass South Korea in 2018 and Japan by 2020 to become the largest LNG importer in the world.

U.S. and China sign large energy deals

President Trump’s recent trip to China resulted in major deals being signed:

  • China Energy Investment Corp. signed a memorandum of understanding with West Virginia to invest $83.7 billion in shale gas, power, and chemical projects
  • Sinopec, Bank of China, and CIC Capital Corp signed a joint development agreement with Alaska Gasoline Development Corp and the State of Alaska to jointly build a $43 billion integrated LNG system to move Alaska’s vast natural gas reserves to China
  • Delfin Midstream is in the preliminary stages of a 15-year sales deal. If the deal is signed, Delfin will be supplying 3 million tons of LNG a year to China Gas Holdings, a city gas distributor
  • China National Petroleum Corp signed an initial agreement with Cheniere Energy for a long-term supply of LNG

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