August 16, 2019 / 8:44 AM / 4 months ago

China's Shenzhen Gas to launch new LNG terminal with cargo from ENI

SINGAPORE (Reuters) - Chinese city-gas distributor Shenzhen Gas (601139.SS) will launch next week in southern China its first fully-owned terminal to import liquefied natural gas (LNG), a company executive told Reuters on Friday.

This will make Shenzhen Gas the second city gas distributor backed by a local government that owns an LNG import facility. The first was Shenergy Group, which opened an LNG import terminal in Shanghai in 2008.

Most of China’s import terminals are owned by the dominant state-run oil and gas companies like China National Offshore Oil Corp (CNOOC) and PetroChina (0857.HK).

China is the world’s third-largest natural gas consumer and second-largest LNG importer after Japan.

Qiu Lihua, general manager of Sino-Benny, a unit of Shenzhen Gas that will operate the terminal, said the new facility at Yantian port in the city of Shenzhen has an annual capacity of 800,000 tonnes of the super-chilled fuel.

“This will be our own facility that will be connected to the existing municipal grid that takes in piped gas from CNOOC and PetroChina,” Qiu told Reuters over the phone.

The new LNG berth and an 80,000 cubic meter storage tank have been built next to an import facility for liquefied petroleum gas (LPG), a business that Sino-Benny has been in for years, said Qiu.

The first cargo of 65,000 cubic meters of LNG is to arrive at Yantian on Sunday, supplied by Italy’s ENI (ENI.MI) at a time when Asian spot LNG prices LNG-AS are near their lowest in nearly three years due to ample supplies and weak demand.

Qiu declined to comment on the price of the cargo but said his company is exploring taking regular supplies under a term contract of three to five years.

“As our berth is not of a standard size, we can’t really rely on random spot supplies as the cargoes available may not fit our berth,” he said.

The terminal is located about 10 km (6 miles) from the larger CNOOC-operated Dapeng LNG terminal, in which Shenzhen Gas has a minority stake.

Qiu expects natural gas demand in Shenzhen, a bustling city bordering Hong Kong, to maintain double-digit growth in the coming few years, led by residential use and power generation.

The number of households using piped natural gas will double by the end of 2020, from 2.1 million now, under a government-led switch from LPG canisters, said Qiu.

Following a gas supply crunch in the winter of 2017/2018, Beijing urged local governments and city-gas distributors to build storage facilities under a broad nation-wide campaign to boost the use of natural gas to cut pollution from coal.

Reporting by Chen Aizhu, with additional reporting by Jessica Jaganathan; Editing by Tom Hogue

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