China’s first private LNG import terminal project in Zhejiang delayed

China’s first private LNG import terminal project in Zhejiang delayed

The start-up of China’s first privately owned LNG import terminal project has been postponed, a source close to independent gas distributor and project operator ENN said Monday, February 16.

The 3 million mt/year Zhoushan LNG terminal project in China’s eastern Zhejiang region received construction approval from Beijing in January this year and was initially scheduled for completion by end 2016.

However, the commissioning has now been delayed until late 2017 or 2018, said the source, who did not disclose the reasons for the delay.

Slow downstream demand, driven by rising gas prices and sluggish GDP growth, coupled with rising pipeline imports and plunging prices of alternative fuels, have halved China’s LNG consumption growth, said industry sources.

While Chinese LNG imports in 2014 totaled 19.89 million mt, up 10.3% from 2013, the growth was lower than the 20.3% and 22.7% registered in 2012 and 2013, Platts data showed.

Declining demand has also kept import infrastructure underutilized — average utilization rate at China’s 12 import terminals was at 55.2% in 2014 — and clouded the outlook of future import projects, said industry sources.

“If you add more receiving facilities, the result will not be more imports but lower utilization of terminals,” said a source with a Chinese state-owned buyer.

“I do not think anybody forecast the economic situation to be like this several years ago.”

China’s demand slowdown has come at a time when new liquefaction capacity and additional contractual volumes are set to come on stream, with three Australian LNG projects due to be commissioned by year end.

According to market sources, two Chinese state-owned buyers have been looking to sell part of their long-term contractual volumes for second-half 2015 delivery to other end-users in the region, but this could not be confirmed at source.

ENN received its first imported LNG cargo at the PetroChina-operated Rudong LNG terminal on December 23, 2014, marking the first time a Chinese private buyer has received a cargo via third-party access to a state-owned terminal.

The gas distributor was also heard to be looking to secure one cargo per quarter through 2015 to meet demand from the residential, industrial and commercial sectors in China’s eastern Zhejiang and Jiangsu provinces.

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