* China's LNG imports rose 35 pct in Q1 to 5.62 mln T
* Seen overtaking S.Korea to become second-biggest LNG buyer
* High prices & shale gas development to challenge China LNG
By Jacob Gronholt-Pedersen
SINGAPORE, May 14 China's imports of liquefied
natural gas (LNG) are growing at a record pace as it aims to use
cleaner fuels to cut smog in big cities, creating a powerful new
source of demand that has the potential to reshape the market
for the super-chilled gas.
Rising Chinese demand gives LNG producers such as Chevron
, Royal Dutch Shell, ExxonMobil and
Total a crucial new sales avenue as they weigh whether
to go ahead with $180 billion in investments into potential new
or expanded LNG projects.
Producers face rising costs in Australia - where many LNG
projects are based - and uncertainty about longer-term demand in
Japan and South Korea, the world's top two buyers of the fuel.
The Chinese, though, are spending billions of dollars in
buying LNG-related interests overseas and in building new import
terminals. LNG imports are up 35 percent to 5.62 million tonnes
in the first quarter against the year-ago period, according to
And imports are set to rise by a third this year, according
to research firm Energy Aspects. They grew 25 percent annually
over the last four years, Thomson Reuters Point Carbon says.
"Producers are certainly looking at China, because that's
the only market right now that will offer 2-3 million tonne
deals," said Gavin Thompson, head of Asia Pacific gas and power
at consultancy Wood Mackenzie.
By the end of this decade, China could overtake South Korea
to become the world's second-biggest LNG buyer behind Japan.
The consultancy forecasts China's imports to rise to 61
million tonnes in 2020 from 18 million tonnes last year, led by
supply from Australia. By comparison, South Korea's state-run
Korea Gas Corp (KOGAS) expects demand to rise to 45 million
tonnes by 2020 from 40 million last year.
Japan and South Korea have increased LNG consumption to
replace lost nuclear power, but uncertainty remains about the
future of idled nuclear plants amid safety and cost concerns.
China's state energy companies, meanwhile, are already
competing for supply by securing equity stakes in projects
across the globe.
Malaysian state-owned oil firm Petronas said in
April it will sell a 15 percent stake in its $11 billion LNG
export terminal on Canada's Pacific Coast to China's Sinopec
Group and state-owned power group China Huadian Corp
HURDLES TO DEMAND GROWTH
China plans to more than double its natural gas supply
capacity to 400 billion cubic meters per year by 2020. Still,
uncertainty remains about the pace of growth in a country where
energy use is dictated by politics.
And consistently high LNG prices in Asia LNG-AS since the
Fukushima disaster could hamper demand growth in China, as the
country remains more price sensitive than Japan and South Korea.
Nevertheless, Asian prices are widely expected to fall as a
new wave of Australian supply hits the market in the next 3-4
years, further boosting Chinese demand, industry observers say.
China's import needs also depend on how successful it is in
developing its own unconventional gas resources. China, believed
to hold the world's largest reserves of shale gas, hopes to
replicate the U.S. production boom.
"Whether or not China develops its own natural gas
production can make a huge swing in the global demand," said
David Carroll, vice president of the International Gas Union.
Until now, at least, it seems China's state energy firms
have focused mostly on securing gas from projects abroad and
shipping it to a string of new LNG imports terminals.
Import capacity is slated to rise from the current 31
million tonnes per year at nine terminals to over 80 million
tonnes by 2018, when another 15 import terminals either approved
or already under construction begin operations.
Add to that another 13 terminals that are either planned or
proposed and capacity could top 110 million tonnes by the
beginning of the next decade. By comparison, Japan last year
imported 87 million tonnes of LNG.
(Additional reporting by Jane Chung and Meeyoung Cho in SEOUL
and Sonali Paul in PERTH; Editing by Muralikumar Anantharaman)