Natural gas demand has shown signs of recovery in the aftermath of the Covid-19 pandemic that choked demand growth last year, and Asian powers are looking to North America for additional supply.
New demand is driven by increased economic activities particularly in China, which was locked down for most of last year, and by the softening liquefied natural gas price.
Weak Asian LNG demand last year diverted dozens of LNG cargoes — initially intended for Asia — to Europe, after much of Russia’s gas was cut off to European countries, Asian energy leaders said on Wednesday at the CERAWeek by S&P Global event in Houston.
Chinese-demand growth
Shan Weiguo, director general of CNPC Economics and Technology Research Institute, said Chinese gas demand is poised to rise by 5% this year, following a dip of 1.7% last year to 366.3 billion cubic metres. The country is diversifying gas supplies through pipeline gas, LNG imports and domestic production, and looking to unconventional gas such as shale gas and tight gas for incremental production increases.
Chinese gas demand will continue to grow until it peaks at 650 Bcm by 2040, he said.
However, he cautioned that LNG imports must fall into China’s purchase philosophy of reliability and affordability. He sees great potential to increase Russian gas imports through existing and new cross-border pipelines.
Upstream has reported that China is ready to increase gas imports from Russia by 47% this year from last year’s 15 Bcm, after Russian gas giant Gazprom started production from the Kovykta field, its second major asset in East Siberia, in addition to the Chayanda field.
The imports last year came via the 2200-kilometre pipeline from Gazprom’s Chayanda field to the Chinese border.
China is now prioritising building a new Russia-China gas pipeline which will run from gas deposits in Russia to northern China, he said. When completed, it will be able to move another 30 Bcm of gas to China.
China now prefers LNG volumes contracted on long-term deals, which offer secure supplies with less volatility, he said.
Akshay Kumar Singh, chief executive of India’s Petronet LNG, said that price is key for Asia’s gas demand increase.
“If LNG is affordable, there will be lots of potential in Asia to import LNG,” he said, adding he has seen lots of tenders for spot LNG cargoes.
India is expanding its LNG import capacity with the commissioning of new terminals, but Singh ruled out pipeline gas imports from Russia — in part due to the absence of infrastructure.
India has six LNG import terminals with a combined nameplate capacity of 42.5 million tonnes per annum.
US LNG advantages
Asian buyers are welcoming US LNG cargoes because of the flexible clauses in the take-or-pay contracts.
CNPC’s Shan said US LNG cargoes have advantages to supplies in other locations as they are Henry Hub-indexed with no destination clauses.
Izumi Kai, president of Jera Energy America, the US outfit of Japan’s power utility Jera, said US cargoes are attractive due to the delivery flexibility as the cargoes are cancellable and divertible.
In 2017, Jera imported Japan’s first LNG cargo from the US as part of efforts to diversify its supply.
Late last year, Japanese oil and gas group Inpex signed a contract with Venture Global LNG’s CP2 LNG project in the US to purchase 1 million tpa of LNG starting as early as 2027 for 20 years.
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