In the context of China's energy transition, natural gas plays a crucial role by addressing the variability of rapidly expanding renewable energy sources and aiding in the reduction of greenhouse gas emissions when it substitutes coal in electricity generation.
Stéphane Michel, President of Gas, Renewables & Power at TotalEnergies, emphasized that this agreement highlights the competitiveness of their LNG operations and allows for the expansion of their long-term sales in Asia. Niu Shuanwen, Senior Vice-President of Sinopec Corporation, remarked that the HoA further solidifies the collaboration between the two firms in the natural gas sector.
He stated, “Natural gas is a vital facilitator for achieving energy transition and dual carbon objectives. Sinopec is dedicated to becoming a leading global clean energy and chemical enterprise and will persist in advancing energy transition alongside a clean, diversified, and secure energy supply.”
In 2023, China regained its status as the largest LNG importer worldwide, with imports rising by 12.4% to 72.1 million tonnes per annum (mtpa). While imports are expected to grow as prices decline, factors such as domestic gas production, pipeline gas imports, and policies favoring local energy industries may limit structural demand growth, potentially leaving Chinese LNG purchasers with excess contracted volumes, according to the Institute for Energy Economics and Financial Analysis (IEEFA).
As a result of a significant increase in long-term contracts set to commence in 2024, Chinese companies are anticipated to enhance their LNG trading activities with buyers in other regions.
In the medium term, IEEFA anticipates a significant increase in the surplus of contracted LNG volumes, as the initiation of new contracts will surpass the growth in LNG demand. According to the IEA, in scenarios of reduced gas demand, China may encounter a natural gas surplus of 80 bcm (58.8 mtpa) by 2030.
IEEFA notes that as the volume of surplus contracts rises, Chinese companies are expected to engage more actively in trading, thereby competing directly with major portfolio players. Similar to their Japanese counterparts, Chinese LNG companies are making substantial investments in LNG infrastructure across emerging Asian markets to stimulate demand.
Recently, TotalEnergies entered into a charter agreement with Spanish shipowner Ibaizabal for a new LNG bunker vessel with a capacity of 18,600 cbm. This vessel, owned by Ibaizabal, will provide LNG to a diverse array of vessels, including containerships, tankers, large cruise ships, and ferries, at TotalEnergies’ LNG bunkering hubs.