IEEJ：March 2017 © IEEJ2017

Prepared for IEEJ 28 February 2017

China Gas Market

Outlook And
Opportunities for Japan
 IEEJ：March 2017 © IEEJ2017

China Gas Supply/Demand Overview

Source: SIA Energy

sia-energy.com
 IEEJ：March 2017 © IEEJ2017

Content

 China Gas Demand

 China Gas Supply
 China Gas Reform Outlook
 Emerging Tier-2 LNG Players in China
 Opportunities for Japanese Companies

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 IEEJ：March 2017 © IEEJ2017

China Gas Demand Is Estimated to Exceed 208 bcm in 2016,

an 8% Year-on-year Growth
China Gas Demand by Sector China Gas Demand Change by Sector
2011-2016E (2016 vs. 2015)
225 27% 20

200 5% 24% 18
10%
16
175 7%
21%
14
150 18%

bcm
12
125 15%
45% 10
bcm

100 12%
8

75 9% 6
2016 gas demand incremental is estimated
50 21% 6% 4 to be 15 bcm, mainly pushed by power and
centralized heating sector and recovery of
2 industrial demand thanks to price down
25 3%
13% since end 2015
0
0 0%

Residential

Transportation
Power and centralized heating

Industrial

Commercial, public service and

2012
2011

2013

2014

2015

2016E

Loss
Commercial, public service and other

other
Transporation
Industrial
Gas power and centralized heating
Residential
% yoy change (r-axis)
Source: SIA Energy
Source: SIA Energy

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 IEEJ：March 2017 © IEEJ2017

Demand Hit Historical High in Dec 2016, Showing Stronger

Seasonal Characteristics
China Monthly Apparent Gas Consumption China Apparent Gas Consumption Seasonality
25.0 40%

22.5 35% 25

20.0 30%

20 Peak-valley monthly difference in

17.5 25% 2016 reached 6.6 bcm, 1.1bcm
higher than that in 2015.
15.0 20%

bcm
bcm

15
12.5 15%

10.0 10%
10
7.5 5%

5.0 0%
5

2.5 -5%

0.0 -10% -
Jun-14

Jun-15

Jun-16
Mar-14

Mar-15

Mar-16
Dec-13

Sep-14

Dec-14

Sep-15

Dec-15

Sep-16

Dec-16

J F M A M J J A S O N D

2010 2011 2012 2013

Mainland China Apparent Consumption % Change YOY 2014 2015 2016

Source: SIA Energy created from the NDRC and China Custom data
Source: SIA Energy created from the NDRC and China Custom data

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 IEEJ：March 2017 © IEEJ2017

Similar Story Will Continue in 2017, and Growth Is

Expected to Return to Double-Digit Rate
China Gas Demand by Sector 2016E 2017 Gas Demand Forecast by Sector

25.0
Loss
22.5 5%
Commercial, public service Residential
20.0 and other 13%
9%
17.5

15.0
bcm

Transporation
12.5
7% Gas power
and
10.0 Drivers: Total Demand centralized
a) continuing contracted LNG imports push heating
b) large gas power capacity will come 232 bcm 23%
7.5
online, especially in Guangdong and
Jiangsu
5.0 c) industrial gas demand and users are
cultivated with infrastructure development
2.5
Industrial
43%
0.0
Transporation
Residential

centralized heating

Industrial

Commercial, public
service and other
Gas power and

Source: SIA Energy Source: SIA Energy

sia-energy.com Service / Presentation Name ◦ Page 6

 IEEJ：March 2017 © IEEJ2017

Primary Energy Target of China’s 13th Five-Year Plan

Primary Energy Mix in 2015 Primary Energy Target in 2020

Non-fossil fuel
Non-fossil fuel
15%
12%

Gas Coal
Coal
6% 58%
64%
Gas
10%

Total Energy Total Energy

Consumption Consumption
4.3 billion tsce 5 billion tsce
Oil
18%

Oil
17%

Source: NDRC, SIA Energy

Source: NDRC, SIA Energy

sia-energy.com Service / Presentation Name ◦ Page 7

 IEEJ：March 2017 © IEEJ2017

Gas is the Biggest Beneficiary of 13th FYP’s Incremental

Energy Consumption

Incremental Energy Consumption in 13th Five-Year Plan

by Fuel
3.0

2.5
2.5 2.3

2.0

1.5
tsce

1.5

1.0
0.7

0.5

0.0
Coal Oil Gas Non-fuel
Non Fossilenergy
Fuels

Source: NDRC, SIA Energy

sia-energy.com Service / Presentation Name ◦ Page 8

 IEEJ：March 2017 © IEEJ2017

China Gas Demand Outlook 2030

China Gas Demand Outlook 2030

550

500

450

400 Gov’t Target

350
bcm

300

250

200

150

100

50

0
2017F

2018F

2019F

2020F

2021F

2022F

2023F

2024F

2025F

2026F

2027F

2028F

2029F

2030F
2015

2016E

Residential Gas power and centralized heating

Industrial Transporation
Commercial, public service and other Loss

Source: SIA Energy

sia-energy.com Service / Presentation Name ◦ Page 9

 IEEJ：March 2017 © IEEJ2017

Content

 China Gas Demand

 China Gas Supply
 China Gas Reform Outlook
 Emerging Tier-2 LNG Players in China
 Opportunities for Japanese Companies

sia-energy.com
 IEEJ：March 2017 © IEEJ2017

Domestic Conventional Gas Production Saw a Moderate

Increase in 2016 Amid Low Oil Prices

Domestic Gas Production 2011-2016 2016 Gas Production Change by Province

160 12.0% 5.0

4.5
140 10.5%

4.0
120 9.0%
3.5

100 7.5% 3.0

bcm
2.5
bcm

80 6.0%

2.0
60 4.5%
1.5

40 3.0%
1.0

20 1.5% 0.5

0.0
0 0.0%

Guangdong
Other
Sichuan

Shaanxi
Xinjiang

(offshore)
2011 2012 2013 2014 2015E 2016E

Production % yoy change (r-axis)

Source: SIA Energy Source: SIA Energy

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 IEEJ：March 2017 © IEEJ2017

China 2017 Gas Supply Growth Will be Led by TOP

Imported LNG and Pipeline Gas, and Domestic Shale Gas

China 2017 Gas Supply Change by Source

240

235

230

225

220
bcm/a

215

210

205

200
Conventional Onshore
2016 Gas Supply

Conventional Offshore

Exported Pipeline Gas

Stock Change
CBM & CMM

SNG
Tight Gas

2017 Apparent

2017 Real Gas

Imported Pipeline Gas

Imported LNG
Shale Gas

Demand
Demand
Source: SIA Energy

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 IEEJ：March 2017 © IEEJ2017

Gas Imports by Source (1/3)

China Gas Monthly Import by Source
9.0

8.0

7.0

6.0

5.0
bcm

4.0

3.0

2.0

1.0

0.0

Turkmenistan Uzbekistan Myanmar Kazakhstan

Qatar Australia Indonesia Malaysia
Yemen Nigeria Trinidad and Tobago Egypt
Equatorial Guinea Papua New Guinea Other
Source: SIA Energy created from China Customs data

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 IEEJ：March 2017 © IEEJ2017

Gas Imports by Source (2/3)

Import Volume Changes by Source (2016 vs. 2015)

16.0
0.4
0.09 0.08 0.07
0.3 0.2
0.8 (0.04) (0.1) (0.2)
14.0 (0.3)
1.7 (0.4)
(0.9)

12.0 2.8

10.0
8.9
bcm

8.0
 Imports from Australia ramped up, pushed by
the executing of new long-term LNG contracts.
 Imports from Uzbekistan resumed in 1Q2016,
6.0 after several times of interrupting in 2015.
 Imports from Turkmenistan increased,
contributed by the demand of peak shaving in
1Q and expansion of Central Asia China Gas
4.0
Pipeline (CACG) line.
 China imports the first cargo from US
contiguous in this August (registered at China
2.0 Custom in September).

(P) Pipeline
(L) LNG
0.0
AUS UZB TKM PNG USA QAT EGY TTO KAZ Other MMR NGA IDN GNQ YEM MYS
(L) (P) (P) (L) (L) (L) (L) (L) (P) (L) (P) (L) (L) (L) (L) (L)
Source: SIA Energy created from China Customs data

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 IEEJ：March 2017 © IEEJ2017

LNG Imports from Australia Accounted for 46% of the Total

China Annual LNG Imports by Source China Active LNG Contracted Volume by
Source (End 2016)
30

20

25
18

16
20
14

mmtpa
15
mmt

12

10
10
8

5 6

4
0
2011 2012 2013 2014 2015 2016 2

0
Qatar Australia Indonesia
Malaysia Yemen Nigeria
Trinidad and Tobago Egypt Equatorial Guinea
Papua New Guinea Other Total

Source: SIA Energy

Source: SIA Energy created from China Customs data

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 IEEJ：March 2017 © IEEJ2017

Gas Imports Prices Dropped Remarkably Since 2H2015

GD/SH Non-residential City-gate Price vs. Imported Gas Cost
5.5
5.0
4.5
4.0
CNY/cubic meter

3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Jul-14

Jul-15

Jul-16
Mar-14

Mar-15

Mar-16
Sep-14

Sep-15

Jan-16

Sep-16
Jan-14
Feb-14

Jun-14

Aug-14

Jan-15
Feb-15

Jun-15

Aug-15

Dec-15

Feb-16

Jun-16

Aug-16
Apr-14

Apr-15

Oct-15

Apr-16
Oct-14

Dec-14

Oct-16

Dec-16
Nov-15
Nov-14

Nov-16
May-14

May-15

May-16
GD/SH Non-residential City-gate Price CAGP Imports cost@GD/SH
Imported LNG Cost@Zhuhai Imported LNG Cost@Rudong
Source: SIA Energy created from China Customs data
*Imports cost includes VAT and refunds, regasification and transmission cost

China’s city-gate price regulation follows closely with Central Asian pipeline gas import costs.
Imports at Rudong LNG terminal represent the 16% slope oil-indexed contracts signed in seller’s
market. Imported LNG became more cost competitive in coastal areas since 2H2015.
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 IEEJ：March 2017 © IEEJ2017

NOCs Marketing Pressure is Mounting: Volume more than

Price

China Contracted LNG Volumes by Player

60

50

40
mmtpa

30

20
Near 20 mmtpa contracted volume
comes online in the period
10

0
Active contracted volume Contracted volume incremental Contracted volume incremental
by end 2014 2015-2017 2018-2020

CNOOC PetroChina Sinopec JOVO ENN Huadian

Source: SIA Energy

* Contracts only include SPAs and HOAs, but exclude upstream equity volume

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 IEEJ：March 2017 © IEEJ2017

CNOOC: Fulfilling TOP Obligation and Securing Domestic

Market Share Is Now Top Priority

CNOOC LNG Monthly Import by Source CNOOC LNG Import Mix 2016
2.0 (16.3mmt)
1.8 America
0.8%
1.6
1.4 Papua New Qatar
Guinea 16.1%
1.2 0.5%
mmt

1.0 Peru
0.8%
0.8
Norway
0.6 0.8%
0.4
Australia
0.2 52.5%
Malaysia
0.0
12.5%
Sep-16
Mar-16

Oct-16

Nov-16

Dec-16
Jan-16

Apr-16

Jun-16

Jul-16
Feb-16

May-16

Aug-16

Indonesia
15.8%
Australia Brunei
Indonesia Malaysia
Norway Papua New Guinea
Peru Qatar Brunei
America 0.4%
Source: SIA Energy, China Customs' data Source: SIA Energy created from China Customs data

Under the pressure of over 21 mmtpa TOP obligation in 2016, CNOOC has almost halted spot
purchase and diverted some cargos to other markets. SIA has observed substantial import
increases from CNOOC’s Ningbo, Zhuhai, Fujian terminals this year, indicating the positive results
of its negotiation/compromises with downstream clients.

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 IEEJ：March 2017 © IEEJ2017

PetroChina: Less Historical Baggage, Active in Spot

Purchase During the Non-peak Season

PetroChina LNG Monthly Import by Source PetroChina LNG Import Mix 2016
1.6
(5.3mmt) Trinidad
America
and Tobago
1.4 Russia 1.3%
2.2%
1.2 4.8%

1.0
mmt

0.8
Australia
0.6
32.9%
0.4

0.2

0.0
Qatar
Sep-16
Mar-16

Oct-16

Nov-16
Jan-16

Dec-16
Apr-16

Jun-16

Jul-16
Feb-16

May-16

Aug-16

44.3%

Australia Indonesia Indonesia

Malaysia Nigeria 2.5%
Oman Papua New Guinea Malaysia
Peru Qatar 1.0%
Nigeria
Russia Trinidad and Tobago Papua New4.8%
America Peru Guinea Oman
Source: SIA Energy created
Source: SIA Energy created from China Customs data from China Customs data 2.3% 2.8% 1.1%

PetroChina has less over-contract burden compared with its two NOC peers. It has been active in
spot and swap purchase taking the advantage of low spot LNG prices during the non-peak
seasons, while pushing Qatar LNG offtake obligation to the winter.

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 IEEJ：March 2017 © IEEJ2017

Sinopec: Deploying Multiple Monetization Routes to Digest

the Mounting TOP Volume

Sinopec LNG Import Mix 2016 Trucked LNG Distribution by Terminal 2016
(3.5mmt) 300
Trucked LNG distribution LNG imports

250

200

10,000 tonne
Australia 150
45.3%
100

50
Papua New
Guinea
54.7% 0

Shanghai…

Caofeidian…
Yangpu (CNOOC)

Qingdao (Sinopec）

Beihai (Sinopec）
Dongguan (JOVO)
Zhuhai (CNOOC)
Dapeng (CNOOC)*

Putian (CNOOC)

Ningbo (CNOOC)

Tianjin (FSRU)

Dalian (PetroChina)

Shennan (PetroChina)
Rudong (PetroChina)
Source: SIA Energy created from China Customs data Source: SIA Energy
*Dapeng imports excludes NWSLNG imports, of which most is regasified

Sinopec’s minimum TOP volume is approximately 5 mmtpa in 2016, an impossible mission for the company.
Sinopec resold part of its contracted cargos to PetroChina, CNOOC and other Asian LNG importers, and played as
an aggressive new entrant in domestic market, especially through trucked LNG distribution. Following the
commissioning of APLNG Train 2, more resell from Sinopec is expected in 2017.

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 IEEJ：March 2017 © IEEJ2017

Trucked LNG Market Share Rapidly Expand, Competing

and Complementing with Pipeline Distribution

China Trucked LNG Supply (2014 – 2016)

25 10%
Land-based LNG Production

Imported LNG via Terminals 9.5%

Market Share (R-Axis)

20 8%

7.4%

 39%
15 6%

5.7%
mmt

 36%
10 4%

5 2%

0 0%
2014 2015 2016
Source: SIA Energy

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 IEEJ：March 2017 © IEEJ2017

Unconventional Gas Supply Outlook

China Unconventional Gas Production China Unconventional Gas Production

Forecast ($50/b) Forecast ($80/b)
140
140

120
120

100 100
bcm/a

bcm/a
80 80

60 60

40 40

20 20

0 0
2005 2010 2015E 2020F 2025F 2030F 2035F 2040F 2005 2010 2015E 2020F 2025F 2030F 2035F 2040F

CBM CMM Shale Gas SNG Coal Oven Gas CBM CMM Shale Gas SNG Coal Oven Gas
Source: SIA Energy Source: SIA Energy

Higher oil price will be needed to boost investment in domestic unconventional gas,
especially coal-based synthetic gas (SNG) & shale gas.

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 IEEJ：March 2017 © IEEJ2017

China Gas Supply Outlook 2030

China 2030 Gas Supply-Demand Balance

550

500
Uncontracted LNG Imports
450 Contracted LNG Imports
13th Five Year
400 Contracted Pipeline Imports
Plan Target
Coal Oven Gas
350
CBM+CMM
300
SNG
bcm

250 Shale Gas

Domestic Conv Exploration

200
Offshore Conventional
150
Onshore Conventional
100 Gas Exports

50 Gas Storage

Real Gas Demand

-
2018F
2019F
2020F
2021F
2022F
2023F
2024F
2025F
2026F
2027F
2028F
2029F
2030F
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015E
2016E
2017F

(50)

Source: SIA Energy

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 IEEJ：March 2017 © IEEJ2017

Content

 China Gas Demand

 China Gas Supply
 China Gas Reform Outlook
 Emerging Tier-2 LNG Players in China
 Opportunities for Japanese Companies

sia-energy.com
 IEEJ：March 2017 © IEEJ2017

Current Government Controlled Reference Prices for Non-

Residential Pipeline Gas at Provincial Gates

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 IEEJ：March 2017 © IEEJ2017

How China’s Gas Pricing Reform Has Evolved

/ Timeline

2014- 2017-
2011 2013 2016
2015 2018

Seasonal
pricing
Remove of
Nationwide Converge emerges;
regulated
Pilot reform expansion of base & fertilizer feed
non-
Wellhead in oil-linked incremental gas price
residential
price Guangdong import non- deregulated;
city gate
control & Guangxi parity residential Pilot reform
prices
for WEP-2 netback city gate of Fujian
national
pricing prices WEP-3 city
wide
gate price
liberalization

Market
Cost Plus Oil-linked Import Parity Netback
Pricing?

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 IEEJ：March 2017 © IEEJ2017

Unfolding Price Reforms in 2016

Revamped pipeline tariff-setting regime with new regulations

Abolished city gate pricing regulation in Fujian: West-East Pipeline (WEP) gas
will not be subject to government-set benchmark price, instead, they will be
negotiated and determined exclusively by seller and buyer

Introduced market-based rates for storage services & storage gas

procurement/sales

Deregulated prices for fertilizer producers

CNPC announced 10-15% city gate price hike during winter season (Nov. 20, 2016
to Mar. 15, 2017)

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 IEEJ：March 2017 © IEEJ2017

Next Reforms are Focused on Breaking Three Layers of

Supply Monopolies and Regulate Midstream Tariffs

Inter-provincial
Onshore Pipeline Power
Conventional (direct supply)

Control lifted in Fujian

Inter-provincial
Pipeline Gas
Pipeline (non-
Imports
direct supply)
Pipeline Imports No TPA access to NOC Industrial
pipelines and terminals
Provincial Grid
Terminal Distribution
Unconventional Regasification Associated
Gas Pipelines Monopoly in
LNG Imports Wholesale & Transport Commercial

City Gas
City Gas Distribution
Unconventional Distribution Transport
Trucked LNG
Gas Liquefaction/
Compression
Exclusive Marketing
Rights

Offshore Gas Residential

Source: SIA Energy

Price not subject to government control Price/tariff subject to provincial government control

Price/tariff subject to NDRC control Price/tariff subject to local government control

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 IEEJ：March 2017 © IEEJ2017

Establishing a Pricing Hub Takes Time and Commitments

Third Party Access

Supply Price Discovery &
to Pipeline/LNG
Competition Disclosure
Terminals

Non-physical OTC Brokered Standardized

Players Enter Trading Trading Contract

Indices Derived
Liquid Forward
Futures Exchange for Long Term
Curves Developed
Contracts

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 IEEJ：March 2017 © IEEJ2017

Shanghai Oil & Gas Exchange, Despite Having Strong

Government Backing, There is Still a Long Way to Go

Establish of
Pipeline Tariff Shanghai
Regulation Exchange
Deregulate
Non-
Residential
City Gate
Prices

Shanghai
Oil & Gas
Exchange

International
Transparent
Legal and
& Timely
Language
Data
Environment

Multiple Gas No Gov’t

Futures Interference
Market and Sources and
Substantial in Prices &
Liquidity Free Capital
Market Size
Flow

TPA to Supply
Infrastructure Competition

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 IEEJ：March 2017 © IEEJ2017

Content

 China Gas Demand

 China Gas Supply
 China Gas Reform Outlook
 Emerging Tier-2 LNG Players in China
 Opportunities for Japanese Companies

sia-energy.com
 IEEJ：March 2017 © IEEJ2017

We See a Conflicting Story in LNG Imports

Risk to
Supply Source Supplier Reasons
Cut

Domestic Onshore CNPC, • Sichuan sour gas will still grow, but face marketing and infrastructure
Conventional Gas Sinopec challenges; Ordos gas may slow due to budget cut

Domestic Offshore • Existing production will continue, but Liuhua 29-1 and Lingshui deepwater
CNOOC
Conventional Gas development may be delayed

CNPC, • Small production, developed infrastructure, but challenging economics under

CBM
CNOOC low prices

Sinopec, • Shale gas success has political significance to NOCs

Shale Gas
CNPC • Secured budget and drilling plans

Sinopec, • Huge environmental challenges

SNG CNOOC, • LNG marketing will be prioritized over SNG; Xin-Yue-Zhe south part will be
Other first built to market Sichuan gas

Central Asian • Take or pay, but with Chinese financing, terms will be more flexible
CNPC
Pipeline Gas • Price is not competitive at Eastern coast at $50/b oil

Myanmar Pipeline • Myanmar gas is not competitive at Southwest or South coast

CNPC
Gas • Take or pay, small volume (with phase II delay), pipeline under-utilized

Russian Pipeline Gas • Cost is competitive but upstream and financing challenges remain
CNPC
(Power of Siberia) • project will be delayed to post-2022

CNOOC, • Take or pay

Contracted LNG CNPC, • Over-contracted, NOCs have to resell at least 2 mmtpa to international
Sinopec market, or default

Under-construction 2nd Tier • Demand driven (market pull)

LNG Terminals Players • Competitive price
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 IEEJ：March 2017 © IEEJ2017

Who Are the Emerging 2nd-Tier LNG Importers

Who are taking actions ? Who may take actions ?

Provincial Gas Grids

City-gas Operators

Gas Power Plants

LPG Distributors/
Oil Players

Integrated Players
Source: SIA Energy

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 IEEJ：March 2017 © IEEJ2017

Unlike NOCs, Tier-2 Players Are Mostly Downstream Driven

Long
E&P Shale Distance LNG LNG Gas
Conven. Gas SNG Pipeline Storage SSLNG Imports Distrib’n City-gas Power

CNPC

Sinopec

CNOOC

Guanghui

ENN

Huadian

Shenzhen
Gas
Guangzhou
Gas
Beijing
Gas
Beijing
Energy
Little presence;
Core operations Developing position Nascent position Source: SIA Energy
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 IEEJ：March 2017 © IEEJ2017

They Come at the Right Timing

Global glut in LNG Domestic reform underway

Below $5/mmbtu DES spot price during the Anti-corruption campaign handicapped the
non-winter seasons NOCs

~11.5% slope vs. oil parity contracts signed by Direct sales is encouraged to bring down end-
the NOCs user gas cost, boost gas consumption

Higher level of flexibility in delivery destination, TPA is encouraged by law; further reform is
take-or-pay obligation, contract duration, etc. under way

Investment approval for LNG import terminals

may be delegated to the provincial gov’ts

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 IEEJ：March 2017 © IEEJ2017

Although Tier-2 Players Are Still Weaker than NOCs in

Many Perspectives, They Are Learning and Growing Fast

Second-tier Players
 Secured market, often the premium market with
NOCs high affordability
Market Security Close to end users
 Established distribution channels

Professional
Government Support
Experience
 Lack of professional
 Weaker central government support
team
 Strong local government support for
 Undetermined about
bringing supply and infrastructure
pricing preference &
competition
term vs spot purchase
 Local tax payer
 Prefers HOAs to SPAs
to start with

Infrastructure
Financial Capability
Access
 Private players have weaker balance
 Difficult terminal TPA access
sheet and lower credit rating compared
 Self-operated terminals often have berth
to NOCs
capacity constraints
 But large state-owned power GENCOs
 No pipeline access except for provincial grid
Source: SIA Energy have deeper pockets
companies
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 IEEJ：March 2017 © IEEJ2017

TPA at Existing LNG Terminals Proved to be Challenging

2016 Utilization of China LNG Terminals Tier-2 LNG Monthly Import 2016
9 90% 0.35
Tier-2 players imported 1.0 mmt LNG in
8 80% 2016, and most of them is received by
0.30
7 70% JOVO, who owns the Dongguan LNG
0.25 terminals. Only 5.5 spot cargos were
6 60%
imported via TPA in the whole year, five
5 50% by Beijing Gas and half by China gas,
0.20
all via CNPC’s Caofeidian Terminal.
mmt

4 40%
3 30% 0.15

mmt
2 20% 0.10
1 10%
0.05
0 0%
Jiangsu (CNPC)

Shennan (CNPC)

Beihai (Sinopec)
Dalian (CNPC)

Qingdao (Sinopec)
Fujian (CNOOC)

Hainan (CNOOC)

Tangshan (CNPC)
Shanghai (CNOOC)

Dongguan (JOVO)
Zhuhai (CNOOC)
Ningbo (CNOOC)

Tianjin (CNOOC)
Dapeng (CNOOC)

0.00

Mar-16

Oct-16

Nov-16

Dec-16
Jan-16

Apr-16

Jun-16

Sep-16
May-16

Jul-16
Feb-16

Aug-16
Beijing Gas (Australia) Beijing Gas (Egypt)
Beijing Gas (Norway) Beijing Gas (Singapore)
China Gas (Nigeria) JOVO (Belgium)
JOVO (Indonesia) JOVO (Malaysia)
Unutilized Capacity Import volume Annual utiliazation rate (R-axis)
Source: SIA Energy created from China Customs data Source: SIA Energy created from China Customs data

In spite of the low utilization of existing terminals, there were only six TPA cases
executed, five of which were Beijing Gas, only one for private player. Major challenges
include：1) Very few LNG terminals offer TPA, on ad hoc basis; 2）TPA mostly offered
to large state-owned city gas; 3）Facing HQ resistance；4）No regas and pipeline
access；5）Windows to private players are offered in lowest demand months.
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In Addition to the Three Under Construction Tier-2 LNG

Terminals, Many More Have Been Proposed

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 IEEJ：March 2017 © IEEJ2017

Questions From the Sellers: Who Are Ready to Sign SPAs?

What’s Their Purchasing Power?
Secured
HOA & SPA

 1 mmtpa 20-yr SPA with BP

3 mmtpa

 1 mmtpa 10-yr HOA with Chevron

 0.6 mmtpa equity entitlement from PNW
 0.5 mmtpa 20-yr HOA with PETRONAS
2 mmtpa

 0.65 mmtpa 10-yr SPA with Chevron

 0.5 mmtpa 10-yr SPA with TOTAL
 0.28 mmtpa 5-yr SPA with Origin
1 mmtpa

 1 mmtpa 20-yr HOA  0.5 mmtpa 5-yr SPA

with Pacific Oil & Gas with PETRONAS
 0.5 mmtpa 5-yr KTA
 10 spot cargo from Engie with Chevron
 0.5 mmtpa 5-yr HOA
with PETRONAS

Site selection Provincial level approval Under construction Commissioning Terminal

and market study NEA approval (for large-
scale greenfield)
Preparation
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 IEEJ：March 2017 © IEEJ2017

Content

 China Gas Demand

 China Gas Supply
 China Gas Reform Outlook
 Emerging Tier-2 LNG Players in China
 Opportunities for Japanese Companies

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 IEEJ：March 2017 © IEEJ2017

Japan and China Share Critical Common Ground and Have

Opportunities to Collaborate Along the Entire Value Chain

• Domestic energy
security concern
as large importer

Japan • Domestic market

reforms China
• Better financial • Over-contracted • Growing
credit LNG and desire domestic gas
for contract
• More experience in renegotiation consumption
international trade • Overseas value • Large domestic
• More experience in chain production
participation
liquefaction • Regional
• More diversified
• Clean technology development gas sources
opportunities
• Regional pricing
hub

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 IEEJ：March 2017 © IEEJ2017

Opportunities in Physical and Paper Trading

Chinese Spot LNG trading

Small terminal demand aggregator
Market

LNG re-distribution
Contract re-negotiation
Regional
FOB/US tolling model Market

Regional Regional pricing

Paper market
Hub Forward curve and price index

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IEEJ：March 2017 © IEEJ2017

LI Yao, CEO, yao.li@sia-energy.com, Mobile: +86 13501249882

PU Jun, Senior Analyst, jun.pu@sia-energy.com, Mobile: +86 18614068329

Content Inquiries ▪ call us: +86 10 6530 7010 ▪ email us: clientservice@sia-energy.com

Contact Us

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