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China launches small-scale LNG exports to Cambodia: Is there room for growth?
19 March 2020IHS Markit Energy Expert
On 14 January 2020 a shipment of five International Organization
for Standardization (ISO) containers of LNG arrived in Cambodia.
This event marks not one but two firsts: Cambodia's first gas
imports and China's first gas exports to Southeast Asia.
Over nearly two decades, China has been using LNG containers to
supply end users outside the pipeline system, provide emergency
peak shaving, and most recently import small volumes from the
international market. However, with moderating domestic demand
growth, a new model has emerged: using ISO containers to divert
surplus gas out of China.
China National Offshore Oil Corporation (CNOOC), who supplied
the gas for this first shipment, sent the ISO tanks from its
Fangchenggang transfer terminal in Guangxi province to
Sihanoukville, Cambodia. The company is well-positioned to access
the Southeast Asian market via its terminals along Southern Chinese
coast and had previously planned for a "South-to-North" gas supply
program in the domestic market.
Figure 1: CNOOC's southern
LNG terminals are well-positioned to access the Southeast Asian
market.
The shipment also marks Cambodian National Gas Corporation's
(CNGC) first step in a plan to distribute gas to downstream users.
CNGC plans to expand the use of ISO containers and LNG trucking to
reach smaller energy consumers, which represent nearly 50% of total
energy use in the country. As the only buyer with an LNG import
license, CNGC intends to eventually bring the super-chilled fuel
for power and transport through investment in LNG terminals and gas
pipelines. Gas in both sectors benefits from cost competitiveness
against oil products and power imports and appeals to the country's
long-term goals of fuel diversity and clean energy development.
In the long term, with each ISO tank holding only around 17
metric tons of LNG, CNGC's larger plans cannot be sustained by ISO
containers alone. The company currently plans to rent or purchase a
floating storage and regasification unit by 2023. Until that
happens, ISO tank imports will continue to be Cambodia's only
short-term gas supply option.
CNGC's target to import 0.1 million metric tons (MMt) of LNG via
ISO tanks in 2020 is equivalent to over 5,800 containers, which is
quite a large number of tanks. Yet this barely amounts to one or
two of regular size LNG cargoes. If we consider this in the context
of China's over 300 Bcm of current market size, the amount is even
smaller. Exports to Cambodia alone will not have a large effect on
China's domestic market and exporters' business operations. In
addition, ISO LNG shipping is a low-barrier entry industry, meaning
China will face competition from other players in the Southeast
Asian region.
Megan Jenkins is a Senior Research Analyst covering
Greater China's gas and LNG analysis.
Shi Yun Fan is a Research Analyst covering Southeast Asia's gas and
LNG analysis.
Figure 1: CNOOC's southern
LNG terminals are well-positioned to access the Southeast Asian
market.
