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Analysis: China's new LNG regas projects delayed amid COVID-19 impact, financial strain

Highlights

2020 regas capacity addition falls to 6.5 million mt/year from 20 million mt/year

Five new regas terminals and two expansion projects delayed to 2021

Private developers face financial constraints, prolonged project delays

Singapore — At least five new LNG regasification terminals in China and two terminal expansion projects that were expected to start operations in 2020 have been delayed to 2021, mainly due to the impact of COVID-19 and the financial strain faced by some of the private companies.

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China's project delays underscore the difficulties faced by oil and gas companies in the current market environment when everyone is cutting costs. It also means that around 13.5 million mt/year of additional regasification capacity from the region will not generate new LNG demand in 2020 as expected.

A total of nine Chinese LNG projects, including new terminals and expansions, were scheduled to commence in 2020, but the delays have left just two LNG terminal expansions on track for the year - PetroChina's Tangshan LNG phase 3 and the Yangshan LNG phase 2, jointly owned by Shenergy Group and CNOOC.

The two projects will add 6.5 million mt/year of new LNG receiving capacity in the second half of this year to China's existing capacity of 78 million mt/year.

The five new LNG terminals that have been delayed are Shanghai-listed Changchun Sinoenergy's Jiangyin terminal, the Chaozhou LNG terminal jointly built by Changchun Sinoenergy and Chaozhou HuaFeng, Jiaxing LNG jointly built by Hangzhou Gas and Jiaxing Gas, Zhejiang Junan Energy Insurance's Damaiyu LNG and CNOOC's Binhai LNG.

The two delayed terminal expansions are PetroChina's Rudong LNG phase 3 and Sinopec's Qingdao LNG phase 2.

Most of these projects are in the eastern provinces of Zhejiang and Jiangsu and the southern province of Guangdong, which were projected to have high economic growth rates and strong LNG demand.

PANDEMIC DELAYS

Many construction projects in China were suspended in the first quarter due to the COVID-19 pandemic and the projects of the three state-owned oil companies PetroChina, Sinopec and CNOOC in particular are likely to have been affected by pandemic-related delays, market sources said.

This is because the state companies slowed down investments and cut capital expenditure in specific areas to save cash. Market sources said government approvals for project work were also impacted.

PetroChina in its Q1 earnings call said it planned to cut capex by around 30% to about Yuan 200 billion ($28.33 billion) in 2020 from its actual spending last year, while lifting its gas output by 5% and keeping oil output flat.

CNOOC cut its production and capital expenditure targets by 2.9% and 11.1%, respectively for 2020 from its original plan, a company executive said at its Q1 earnings call. "We are rich in cash flows. The reduction is based on each individual project appraisal, cutting those with no profit and no cash flow contribution," CNOOC CFO Xie Weizhi said.

Project delays by private companies were mainly due to financial stress, with some developers facing fund shortages in 2019 even before the outbreak of COVID-19. Some projects never materialized.

For example Baota Petrochemical, which originally planned to launch the first phase of its Penglai LNG terminal in 2020, ran out of funds and deferred construction. It's unknown when the project will be restarted.

Several private companies building new terminals in China in coming years are from non-gas industries ranging from manufacturing to petrochemicals, with tight capital flows and often no experience in the gas or LNG sectors. Typically LNG projects backed by the national oil companies or deep-pocketed conglomerates are moving ahead seamlessly.

DELAYED TO 2021

Shanghai-listed Changchun Sinoenergy said it plans to start its 2 million mt/year Jiangyin LNG terminal in July 2021 while its 1 million mt/year Chaozhou LNG phase 1, built jointly with Chaozhou Huafeng Group, is expected to start in September 2021. These were originally scheduled for 2019 and have been under construction for several years with financing issues.

The 1 million mt/year Jiaxing LNG terminal in Zhejiang province, jointly built by downstream gas distributors Hangzhou Gas and Jiaxing Gas, is an emergency peak shaving storage station now delayed to July 2021, company sources said. Construction work at the terminal's dock kicked off recently after government approval.

Zhejiang Junan Energy Insurance's 2 million mt/year Damaiyu LNG, originally scheduled for end 2019, has been delayed to December 2021 due to fund shortages, market sources said.

Among the national oil companies, CNOOC's 3 million mt/year Binhai LNG terminal has been delayed from December 2020 to June 2021, sources said. It comprises four LNG storage tanks of 220,000 cu m each and a dock capable of berthing LNG carriers up to 266,000 cu m.

PetroChina's 3.5 million mt/year Rudong LNG phase 3 expansion has been delayed to July 2021, and Sinopec's 1 million mt/year Qingdao LNG phase 2 expansion is now expected in August 2021.PI

Pipeline of China's new LNG regasification projects:

Projects
Owners
Planned start date
Capacity (mil mt/year)
Province
Tangshan LNG Phase 3
PetroChina
2020
3.5
Hebei
Yangshan LNG Phase 2
Shenergy Group / CNOOC
2020
3
Shanghai
Zhoushan LNG Phase 2
ENN Group
2021
2
Zhejiang
Binhai LNG*
CNOOC
Jun-21
3
Jiangsu
Jiaxing LNG*
Hangzhou Gas / Jiaxing Gas
Jul-21
1
Zhejiang
Rudong LNG Phase 3*
PetroChina
Jul-21
3.5
Jiangsu
Jiangyin LNG*
Changchun Sinoenergy
Jul-21
2
Jiangsu
Qingdao LNG Phase 2*
Sinopec
Aug-21
1
Shandong
Chaozhou LNG Phase 1*
Changchun Sinoenergy / Chaozhou Huafeng Group
Sep-21
1
Guangdong
Wenzhou LNG
Sinopec / Zhejiang Provincial Energy Group
Dec-21
3
Zhejiang
Ningbo LNG Phase 2*
CNOOC
Dec-21
3
Zhejiang
Damaiyu LNG*
Zhejiang Junan Energy Insurance
Dec-21
2
Zhejiang
Nangang LNG Phase 2
Sinopec
Dec-21
4.8
Tianjin
Zhangzhou LNG
CNOOC
early 2022
3
Fujian
Longkou LNG
Sinopec
2022
6
Shandong
Maoming LNG
CNOOC
2022
3
Guangdong
Nangang LNG
Beijing Gas
2022
5
Tianjin
Nanjiang LNG Phase 2
CNOOC
2022
3
Tianjin
Qidong LNG Phase 3
Guanghui Energy
2022
1.85
Jiangsu
Wuhu LNG
Huainan Mining
2022
1.5
Anhui
Yueyang LNG
Yueyang LNG & Guanghui Energy
2022
0.5
Hunan
Ganyu LNG*
China Huadian Green Energy
2022
3
Jiangsu
Yantai LNG
Poly-GCL Pan-Asia International Energy (Shandong)
2022
5
Shangdong
Wenzhou LNG
Huafon Group
2022
1
Zhejiang
Tangshan LNG
China Suntien Green Energy
2022
5
Hebei
Nansha LNG
Guangzhou Gas
2022
1
Guangdong
Jiangyin LNG
Jiangsu Jiasheng Gas
2022
2
Jiangsu
Rudong LNG
Jiangsu Guoxin LNG
Dec-22
2.95
Jiangsu
Longkou LNG
China Oil & Gas Piping Network
2023
5
Shandong
Chaozhou LNG
Huaying Natural Gas
2023
3
Guangdong
Yangjiang LNG
Guangdong Energy
2024
2.8
Guangdong
Shenzhen Diefubei LNG
PetroChina
2024
3
Guangdong
*Delayed projects

China's existing regasification terminals:

Terminals
Owners
Planned start date
Capacity (mil mt/year)
Province
Dalian LNG
PetroChina
2011
6
Liaoning
Tangshan LNG
PetroChina
2013
6.5
Hebei
Nanjiang LNG
CNOOC
2013
3
Tianjin
Nangang LNG
Sinopec
2018
6
Tianjin
Qingdao LNG
Sinopec
2014
6
Shandong
Rudong LNG
PetroChina
2011
6.5
Jiangsu
Qidong LNG
Guanghui Energy
2017
1.15
Jiangsu
Yangshan LNG
Shenergy & CNOOC
2009
3
Shanghai
Wuhaogou LNG
Shenergy
2008
1.5
Shanghai
Ningbo LNG
CNOOC
2013
3
Zhejiang
Zhoushan LNG
ENN Group
2018
3
Zhejiang
Putian LNG
CNOOC
2009
6.3
Fujian
Dapeng LNG
CNOOC
2006
7
Guangdong
Zhuhai LNG
CNOOC
2014
3.5
Guangdong
Yudong LNG
CNOOC
2017
2
Guangdong
Diefu LNG
CNOOC
2018
4
Guangdong
Dongguan LNG
JOVO
2012
1.5
Guangdong
Shenzhen LNG
Shenzhen Gas
2019
0.8
Guangdong
Beihai LNG
Sinopec
2016
3
Guangxi
Fangchenggang LNG
PetroChina
2019
0.6
Guangxi
Yangpu LNG
CNOOC
2016
3
Hainan
Shennan LNG
PetroChina
2014
0.6
Hainan
Sources: Company websites, press releases, market sources