U.S. LNG for China Arrives Via Panama Canal
August 24 2016 - 9:48AM
Dow Jones News
By Jenny W. Hsu
The first shipment of liquefied natural gas from the U.S. to
China arrived this week, thanks to the recently expanded Panama
Canal's easing access to the robust Asian market for U.S. gas
exporters.
The shipment was chartered by Royal Dutch Shell PLC, the company
confirmed to The Wall Street Journal. The cargo, from the Sabine
Pass export facility in the U.S. Gulf of Mexico, was delivered to
the Yantian Port on Monday in southern China and was purchased by
China National Offshore Oil Corp. as part of a long-term contract,
according to S&P Global Platts, an energy and commodities
information provider.
Cnooc didn't respond to a request for comment.
U.S. LNG, which is usually transported on large ships that can't
fit in the older Panama Canal locks, hasn't been able to compete in
Asia. The new locks, which opened in June and can accommodate
larger ships, mark a significant moment for U.S. exporters.
"The expansion has significant implications for LNG trade,
reducing travel time and transportation costs for LNG shipments
from the U.S. Gulf Coast to key markets in Asia and providing
additional access to previously regionalized LNG markets," the U.S.
Energy Information Administration said.
The new locks can reduce the travel time from the U.S. to North
Asia for ships that couldn't fit in the old locks by about one
third -- to 20 days -- and cut transportation costs by about 30
cents to $1 per million British thermal units, said research
consultancy Energy Aspects,.
"This shipment could be the start of many more U.S. gas cargoes
coming to Asia, especially now more Chinese smaller independent gas
companies are keen on buying foreign gas on a spot basis, " said
Peter Lee, an Asian energy analyst at BMI Research.
LNG is natural gas that is cooled in ultralow temperatures to a
liquid form so it can be stored and transported by ship. Prices
have recently come under intense pressure in Asia, which makes up
70% of the world's demand, due to a gusher of new supply.
LNG producers expect to add 40 million metric tons of capacity
in 2016 alone.
Meanwhile, demand in Japan and South Korea -- the top two
importers of LNG in the world -- is falling due to such factors as
a decline in overall power demand and an increasing reliance on
coal. Moreover, many buyers have already signed contracts to take
LNG from suppliers for the next decade or more.
"[This leaves] China as the main growth story for LNG in the
region," said Stuart Elliot, an LNG analyst at S&P Global
Platts.
China's LNG imports were up 21% on-year in the first six months
of this year to 11.5 million tons. Australia and Qatar were the
leading two suppliers, according to China's General Administration
of Customs.
Chinese government officials have said they want to increase the
ratio of natural gas in the country's total energy mix to 10% from
the current 5% by 2020.
--Sarah Kent in London and Mayumi Negishi in Tokyo contributed
to this article.
Write to Jenny W. Hsu at jenny.hsu@wsj.com
(END) Dow Jones Newswires
August 24, 2016 09:33 ET (13:33 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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