Development status and prospects of liquefied natural gas receiving stations in China

With the deepening of energy transformation, the position of liquefied natural gas (LNG) as a clean and efficient energy resource in the global energy structure is increasingly prominent, and market demand continues to grow. Since the completion and operation of China National Offshore Oil Corporation's Guangdong Dapeng LNG receiving station, the first LNG receiving station in China, in 2006, the construction of infrastructure such as LNG receiving stations in China has accelerated. As an important part of the natural gas industry chain, LNG receiving stations are an important channel for global high-quality resources to enter the Chinese market, and also the main window for domestic demand side enterprises to connect with global resource combinations. They not only actively help Chinese enterprises to allocate and optimize resources globally, but also effectively improve the efficiency of resource utilization in the oil and gas industry, which is of great significance for ensuring the safety of natural gas supply.

Development Status of LNG Receiving Stations in China

（1） The receiving capacity of LNG receiving stations continues to improve

According to the "2023 Domestic and International Oil and Gas Industry Development Report" released by the China Petroleum Economic and Technological Research Institute, as of the end of 2023, 28 LNG receiving stations have been built in China, with an annual receiving capacity of over 116 million tons and a storage tank capacity of 18 million cubic meters, capable of storing 10 billion cubic meters of LNG.

On May 21, 2024, with the smooth berthing of the "MACOMA" LNG carrier at berth 1 of Longjiao Operation Area in Houshi Port, Xiamen Port, the 29th receiving station in mainland China, Zhangzhou LNG receiving station, was successfully put into operation, filling the gap of no LNG receiving station in the Xiamen Zhangzhou Quanzhou area and opening up a new channel for the import of clean energy in Fujian Province. The Zhangzhou LNG project is located on the north side of Xinggu Bay in Longjiao She Ethnic Township, Longhai District, Zhangzhou City, Fujian Province. The first phase includes three 160000 cubic meter LNG storage tanks with a designed LNG processing capacity of 3 million tons per year. On June 30th, the world's largest single tank capacity LNG storage tank group, the CNOOC Yancheng "Green Energy Port" project, which was independently designed and built by China, completed the construction of six 270000 cubic meter LNG storage tanks in Yancheng, Jiangsu. This marks the completion of the largest LNG reserve base in China. The "Green Energy Port" project of CNOOC Yancheng is located in Binhai Port Industrial Park, Yancheng City, Jiangsu Province. It is a key planning project for the construction and interconnection of the national natural gas production, supply, storage and sales system. The first phase of the project will build 10 large liquefied natural gas storage tanks, including 4 220000 cubic meter LNG storage tanks and 6 270000 cubic meter LNG storage tanks completed in this construction, with a total tank capacity of 2.5 million cubic meters.

It is reported that by 2024, there will be 33 LNG receiving stations in operation nationwide, with a total unloading capacity of 163.04 million tons per year. By 2025, it is expected that 6 new LNG receiving stations will be put into operation, 2 ongoing LNG receiving stations will be expanded, and there will be 39 LNG receiving stations nationwide with a total unloading capacity of 2014.4 million tons per year. During the 15th Five Year Plan period, it is expected that 11 LNG receiving stations will be put into operation. By the end of 2030, the national unloading capacity may increase by 43.53 million tons per year, and the unloading capacity will be increased to 244.97 million tons per year.

（2） Continuous operation of LNG receiving stations drives rapid growth in LNG import capacity

LNG receiving stations are the only window for China's LNG imports, and the continuous operation of LNG receiving stations has driven the rapid growth of China's LNG import capacity. According to data released by the General Administration of Customs, China's natural gas imports reached 119.97 million tons in 2023, a year-on-year increase of 9.9%. Among them, the import volume of LNG was 71.32 million tons, a year-on-year increase of 12.6%; The import volume of pipeline gas was 48.65 million tons, a year-on-year increase of 6.2%. The proportion of LNG imports in the total natural gas imports and the year-on-year increase in LNG imports are both greater than those of pipeline gas. In 2023, China once again surpassed Japan to become the world's largest importer of LNG. A total of about 11 new LNG long-term agreements have been implemented throughout the year, with a contract volume of approximately 6.4 million tons per year.

From the perspective of LNG consumption, in the first half of this year, the domestic LNG consumption was 19.5738 million tons, a year-on-year increase of 31.37%. The "China Energy Outlook 2060 (2024 Edition)" report released by China Petrochemical Economic and Technological Research Institute predicts that the domestic natural gas consumption will be about 425 billion cubic meters by 2025, accounting for about 9% of primary energy; Around 2040, domestic natural gas demand is expected to peak at approximately 610 billion cubic meters, accounting for nearly 13% of primary energy. Domestic natural gas production will reach its peak around 2040, with a peak scale of around 310 billion cubic meters. Based on this, it can be inferred that the peak value of China's total natural gas imports is within 300 billion cubic meters, indicating significant growth potential. With the growth of consumption and import volume, there is still significant room for improvement in the scale of domestic LNG receiving stations.

（3） LNG receiving stations play an increasingly prominent role in ensuring natural gas supply

LNG receiving stations have the functions of receiving, gasifying, and peak shaving in the entire natural gas industry chain, and are important infrastructure in the industry chain. Most of the receiving stations that have been put into operation domestically are connected to inland natural gas pipelines, highlighting their advantages in rapid response capabilities and providing solutions for peak shaving of urban gas supply. From the perspective of natural gas supply guarantee situation, looking at the domestic natural gas market in recent years, the main theme has been that "the off-season is not weak, and the peak season is even more prosperous". LNG receiving stations have effectively improved their gas supply capacity during the peak summer and winter seasons every year, playing an important role in improving natural gas supply guarantee, natural gas operation and reception.

Taking the Dapeng LNG receiving station as an example, the gas supply to Guangdong Province accounts for about 40% of the province's natural gas consumption during the same period, and more than half of the province's natural gas generators are supplied by the Dapeng LNG receiving station. Since July this year, due to the strengthening of the westward extension of the subtropical high pressure, more than 100 warning areas in Guangdong Province have issued yellow high-temperature warning signals, and the demand for gas and electricity continues to rise. As the main force of natural gas supply in the Guangdong Hong Kong Macao Greater Bay Area, Dapeng LNG receiving station unloaded a total of 11 ships in July, with an LNG export volume of 802000 tons, effectively playing the role of the "pillar" of regional energy supply.

Development Trends of LNG Receiving Stations

（1） The receiving station needs further fair and open access

At present, China's LNG industry has formed a complete LNG industry chain and business chain, including upstream natural gas production liquefaction, midstream unloading and storage, and downstream comprehensive utilization. Fairness and openness are the fundamental directions for achieving high-quality development of LNG receiving station business. Since 2014, a series of guiding policies and management measures related to the fair opening of LNG receiving stations have been issued at the national level, guiding oil and gas pipeline infrastructure operators to open up equally to third-party market entities, provide transportation, storage, gasification, liquefaction, compression and other services, and carry out special supervision on the implementation of fair opening of LNG receiving stations. Under the guidance of national policies, the fair and open process of LNG receiving stations is more reasonable and efficient, the fair and open information is more sound and transparent, and the fair and open mechanism is more standardized and orderly. At the same time, relevant enterprises actively explore and practice, forming different open models. The receiving stations under the National Pipeline Network Group implement a fair and open model, continuously explore and enrich the commercial practices of fair and open facilities, promote the fair and open access of oil and gas pipeline infrastructure to the whole society, and provide a unified transportation platform for all market participants. China National Petroleum Corporation (CNPC) has taken the lead in opening up LNG receiving station windows to third parties through offline negotiations. China National Offshore Oil Corporation (CNOOC) has opened window periods for floating LNG receiving stations in Zhuhai, Ningbo, and Tianjin to Sinopec, Zhejiang Energy Group, and New Oriental Group through offline negotiations. Subsequently, CNOOC has explored the implementation of open bidding during the window period.

Overall, the number of receiving stations in China that are fully open to third parties is still limited, and the window period is still a scarce resource. In the future, LNG receiving stations need to shift towards a more fair and open situation. On the basis of fairness and openness, LNG receiving stations can fully leverage their platform empowerment role, vigorously cultivate upstream and downstream market entities, reduce intermediate costs, guide more upstream high-quality natural gas resources to enter the Chinese market, help domestic urban gas, power generation, and trade demand side enterprises connect with more overseas high-quality LNG resources, enable more downstream small and medium-sized natural gas users to achieve low-cost resource procurement and logistics distribution, meet rapidly growing consumer demand, and achieve synchronous growth of the receiving station's own business scale and operational efficiency while supporting the development of the natural gas industry.

（2） The reserve function of the receiving station will be further demonstrated

In 2023, the effective working gas volume of China's gas storage facilities is about 23 billion cubic meters, accounting for less than 6% of China's total natural gas consumption. The proportion of working gas volume in a gas storage facility to natural gas consumption represents to some extent the peak shaving capacity of a natural gas market. The global average level of this proportion is around 11%. In comparison, China's development in gas storage construction is relatively lagging behind. Compared to gas storage facilities, LNG storage tanks have relatively flexible site selection, shorter construction periods, and higher maneuverability.

With the continuous growth of LNG receiving capacity and the normalization of fair and open LNG receiving stations, in order to fully utilize the storage tank facilities of LNG receiving stations, the National Pipeline Network Company and Shanghai Petroleum and Natural Gas Trading Center have successively launched LNG receiving station window period products and LNG storage products, providing LNG resource import and storage services for the market and improving seasonal peak shaving capabilities. From the perspective of tank capacity, domestic LNG factories and storage stations have tank capacities ranging from 5000 to 30000 cubic meters, while LNG receiving station storage tanks often exceed 200000 cubic meters, possessing stronger resource storage capabilities. From the perspective of consumption areas, according to statistics, the LNG consumption in 9 coastal provinces including Shandong, Hebei, and Guangdong will account for more than 40% of the total domestic consumption in 2023. Moreover, the economically developed and densely populated eastern region has a greater demand for natural gas resource peak shaving. LNG receiving station storage tanks can achieve nearby peak shaving and gas supply, which is in line with mainstream domestic consumption areas. Given the situation of domestic reserves and peak shaving demand, LNG receiving station storage tanks may shift more towards reserve peak shaving facilities, which will lay a good foundation for the supply stability and price stability of the domestic natural gas market in the later stage.

（3） The receiving station needs to continuously optimize operations and innovate business models

With the increase in the number and capacity of LNG receiving stations in China, market competition has intensified and load rates have decreased, thereby affecting economic benefits. According to relevant data, the average utilization rates of domestic receiving stations from 2021 to 2023 are 78%, 59%, and 51%, respectively, showing a decreasing trend year by year. During the period of the 15th Five Year Plan and beyond, although Chinese resource supply enterprises actively purchase imported LNG resources to meet the growing domestic demand for natural gas, the remaining usable space of LNG receiving stations is still relatively large after deducting the implemented resources.

In addition to the reserve function mentioned above, the remaining capacity of the receiving station can also be used for various purposes such as bonded transportation and futures delivery. For example, in February of this year, the first LNG bonded warehouse in the Beijing Tianjin Hebei region was officially put into use. The implementation of this innovative model is expected to enrich the functions of the ports in the Beijing Tianjin Hebei region, better play the role of the receiving station in ensuring winter LNG supply, and attract more Beijing Tianjin Hebei enterprises to carry out diversified LNG business. Against the backdrop of rapid development and intensified market competition in the domestic natural gas industry, LNG receiving station operators are accelerating market-oriented operations based on their own situation. Through deep cooperation with upstream and downstream enterprises and trading centers, they are revitalizing upstream resource supply and promoting the landing of downstream market resources. They actively explore business types such as matching transactions, tank capacity and window period transactions, bonded delivery, etc., expand business models, and optimize receiving station operations. This is also an inevitable way to improve the utilization efficiency of receiving stations and enhance the return on investment of infrastructure.