an analysis of china’s lng demand and the spa supply

29 July 2016

An Analysis of China’s LNG demand and the SPA supply

Winn Maria Hayman Shaozeng Feynman

Energy Bureau Sinopec GDLNG CNOOC Guangzhou Gas

INTRODUCTION

THE SIGNED SPA VS. THE FACILITIES CAPABILITY IN CHINA

CHALLENGES AND OPPORTUNITIES FOR LNG CONSUMPTION

CONCLUSION

1

2

3

4

An Analysis of China's Capability to Absorb the Signed SPA

Content


Introduction


文 ?内

容

Signed SPA

Difficulties

LNG Demand

Opportunities

Introduction


The Signed SPA VS. The Facilities Capability in China

7 SPA signed by CNOOC, totally procured long term 23.4 million tons LNG per annum.

Buyer Project

Annual ToP

Obligation

(mmt)

Supply

Duration(year)

SPA Signing

(year)

Delivery

Commencement

(year)

CNOOC

Australia North West Shelf LNG

Project 3.70 25 2002 2006

Indonesia Tangguh LNG project 2.60 25 2006 2009

Malaysia Tiga LNG project 3.00 25 2006 2009

Qatar LNG

(Phase II) 2.00 25 2008 2009

TOTAL 1.00 15 2009 2010

Australia QCLNG project（BG） 3.60 20 2010 2014

Australia QCLNG project & BG

Portfolio 5.00 20 2012 2015

BP Portfolio 1.50 20 2014 2019

The Signed SPA--CNOOC (China National Offshore Oil Company) SPA



Buyer Project

Annual ToP

Obligation

(mmt)

Supply

Duration

(year)

SPA Signing

(year)

Delivery

Commencement

(year)

CNPC

Qatar LNG (Phase IV) 3.00 25 2008 2011

SHELL 2.00 20 2008 2011

Exxon Mobile Gorgon Project 2.25 20 2009 2016

Yamal LNG 3.00 20 2018

The Signed SPA--CNPC (China National Petroleum Co.) SPA

CNPC signed 4 SPA with totally 10.25 million tons LNG procurement quantity per year and 3 of them are in operation now.



The Signed SPA--SINOPEC (China National Petrochemical Co.) SPA

SINOPEC is importing 9.6 million tons LNG from PNG LNG project (2 million tons per year) and Australia APLNG project (7.6 million tons per year) every year.

Buyer Project Annual ToP

Obligation (mmt)

Supply

Duration

(year)

SPA Signing

(year)

Delivery

Commencemen

t (year)

SINOPEC

PNG LNG project 2.00 20 2009 2014

Australia APLNG project (T1) 4.30 20 2011 2015

Australia APLNG project (T2) 3.30 20 2012 2016



The Signed SPA-- Other companies

Buyer Project

Annual ToP

Obligation

(mmt)

Supply

Duration

(year)

SPA Signing

(year)

Delivery

Commencement

(year)

ENN

Total 0.50 10 2018

Origin 0.50 5 2018

Chevron 10 2018

Huadian

Pavilion 2020

Chevron 1.00 10 2020

BP 0.50+0.50 20 2021

Guanghui Petronas 0.50 10 2017

From 2017 to 2020, some small-scale LNG SPA will be put into operation gradually and totally will reach 3.5 million tons per year in 2020.

Till June, 2016, there are 14

receiving terminals in operation

status in China Mainland, total

receiving capability 38.5 million

tons per year.



LNG Receiving Terminal in Operation Status

The LNG Receiving Terminals in China



LNG Receiving Terminal in Operation Status

No. Receiving

Terminal Owner

Receiving Capacity Status Start-Up Time

Phase I Phase II Phase III Phase I Phase II Phase III Phase I Phase II Phase III

1 Shenzhen

CNOOC

3.70 3.00 3.00 Operation Construction — 2006.6 2018 —

2 Zhuhai 3.50 3.50 3.50 Operation Construction — 2013.5 2018 2020

3 Putian 2.60 2.40 2.40 Operation Planning — 2008.5 TBD —

4 Ningbo 3.00 3.00 3.00 Operation Planning — 2013.4 — —

5 Tianjin

FSRU 2.20 3.00 3.80 Operation Construction — 2013.11 2018 —

6 Hainan 3.00 3.00 — Operation — — 2014.8 — —

7 Rudong

CNPC

3.50 3.80 3.00 Operation Construction — 2011.6 2018 —

8 Tangshan 3.50 3.00 3.00 Operation Planning Planning 2013.12 — —

9 Dalian 3.00 3.00 3.00 Operation Planning Planning 2011.11 — —

10 Qingdao SINOPEC

3.00 — 3.00 Operation Planning Planning 2014 — —

11 Beihai 3.00 — 3.00 Operation Planning — 2016 TBD —

12 Shaihai Shenneng

3.00 2.00 3.00 Operation Planning — 2009.10 TBD —

13 Wuhaogou 0.50 3.00 — Operation Construction — 2008.11 — —

14 Jiufeng Jiufeng 1.00 3.00 — Operation — — 2012.12 — —



LNG Receiving Terminal under Construction in China

No. Receiving

Terminal Owner

Receiving Capacity Status Start-Up Time

Phase I Phase II Phase III Phase I Phase II Phase III Phase I Phase II Phase

III

1 Yuedong

CNOOC

2.00 7.00 2.00 Construction Planning — 2017 TBD —

2 Shenzhen 4.00 — — Construction — — 2017 — —

3 Fangchenggang 0.60 — — Construction — — 2017 — —

4 Yuexi

5 Tianjin SINOPEC 3.00 — 7.00 Construction Planning — 2017 TBD —

6 Qidong Xinjiang

Guanghui 0.60 — 1.50 Construction Planning Planning 2017 TBD TBD

7 Zhoushan ENN 3.00 — 1.20 Construction Planning Planning 2017 TBD TBD



The Long Term SPA Quantity and the Receiving Capability

Year 2015 2016 2017 2018 2019 2020

Receiving Capability (mmt) 35.8 38.8 52 65.3 65.3 68.8

SPA Tops Obligation (mmt) 28.9 35.05 39.25 43.25 44.75 45.75

0

20

40

60

80

2015 2016 2017 2018 2019 2020

RECEIVING CAPABILITY & TOP OBLIGATION MATCHING ANALYSIS

Receiving Capability (mmt) SPA ToP Obligation (mmt)



The Physical Receiving Capability for Spot Cargoes

Year 2015 2016 2017 2018 2019 2020

Spot Cargo Physical Receiving Capability (mmt) 6.9 3.75 12.75 22.05 20.55 23.05

0

5

10

15

20

25

2015 2016 2017 2018 2019 2020

Spot Cargo Physical Receiving Capability (mmt)


Challenges and Opportunities for LNG Consumption

1. Challenges A. The Growth Rate of Economy in China Slowdown

Growth rate of Economy slowdown ≠ Economy slowdown

The New Normal Status


Source: National Bureau of Statistic of China

Overcapacity

Debt

demand

1. Difficulties A. The Growth Rate of Economy in China Slowdown



1. Challenges B. The Uncertainty of Gas-power Generation

0

1000

2000

3000

4000

5000

6000

Annual electricity consumption in China

Unit billion kwh



19%

76%

2% 3% 0%

Percentage of output in Power Electricity in China 2014

Output of Hydro Power Electricity

Output of Thermal Power Electricity

Output of Nuclear Power Electricity

Output of Wind Power Electricity

Others




difficulty Solar power

Wind power

Nuclear power




difficulty 1. Challenges C. Advantage of LNG Price Disappeared

0

20

40

60

80

100

120

140

Mar

-11

Jun

-11

Sep

-11

De

c-1

1

Mar

-12

Jun

-12

Sep

-12

De

c-1

2

Mar

-13

Jun

-13

Sep

-13

De

c-1

3

Mar

-14

Jun

-14

Sep

-14

De

c-1

4

Mar

-15

Jun

-15

Sep

-15

De

c-1

5

USD

/ b

arre

l

International Crude Oil Prices Curve (2011-2015)

OPEC

WTI

Brent oil

Source：http://www.plasway.com/price/price_base_d.jsp

LNG Price Sudden

declines

JCC price

Lag of adjustment

Strict Regulation



difficulty 1. Challenges D. Competition with Imported Pipeline Gas and Unconventional Natural Gas



difficulty 1. Challenges D. Competition with imported pipeline gas and unconventional natural gas



2. Opportunities A. Coal-to-gas Switching

66%

17%

6%

11% Different Energy Consumption in China 2014

Total Consumption of Coal

Total Consumption ofPetroleum

Total Consumption of NaturalGas

Total Consumption of HydroPower, Nuclear Powe andWind Power



2. Opportunities A. Coal-to-gas Switching

Obsoleted coal-fired boiler

New biomass-fired boiler



2. Opportunities B. Reform of NGM (Natural Gas Market)

Highly regulated Market-based



2. Opportunities B. Reform of NGM (Natural Gas Market)

The first private company (ENN) own LNG Importation and Bunkering Terminal in China



2. Opportunities C. City Gas

0

50

100

150

200

250

300

0

50000

100000

150000

200000

250000

300000

350000

400000

450000

500000

2010 2011 2012 2013 2014

Po

pu

lati

on

/mill

ion

Len

gth

/km

Length of Gas Pipeline&Users of City Gas in China

Length of Gas Pipeline(km) Users of City Gas(million)



2. Opportunities C. City Gas

0.0020.0040.0060.0080.00

100.00120.00140.00160.00180.00200.00

2010 2011 2012 2013 2014

bill

ion

cu

bic

met

ers

Consumption of Natural Gas in China Life Natural Gas Consumption

Industrial Natural Gas Consumption

Total Natural Gas Consumption



2. Opportunities D. Carbon Trading



9.02% 2.63%

8.82%

42.57% 0.49%

14.35%

22.12%

Cumulative Turnover of Carbon Emission Credits

Beijing

Tianjin

Shanghai

Hubei

Chongqing

Guangdong

Shenzhen

2. Opportunities D. Carbon Trading

48.54 million tons， 13.8 billion Yuan！ Till 2016



Conclusion

China Gas Demand Forecast

Low Case High Case

Forecasted by CNPC

269bcm (192mmt)

334bcm (239mmt)

Signed SPA 25-51mmt


Conclusion

Environmental

concern and

policy choices

mainly decide the

demand of LNG.

China’s facilities

can support the

signed SPA and

further spot

potential.

The China reform

process plays a

more important

role.

China has the potential to

use more natural gas

Thank you


End

an analysis of china’s lng demand and the spa supply

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