First privately run LNG port opens

China's first major privately owned liquefied natural gas import terminal entered operation on Tuesday in eastern Zhejiang province, setting the scene for more such facilities in the future.

Operated by ENN Group, an independent Chinese gas distribution company, the newly opened Zhoushan terminal received its maiden cargo this week, with the arrival of LNG tanker Stena Blue Sky.

Terminals, the core infrastructure of the LNG import trade, have attracted many private companies in recent years amid China's rising demand for the cleaner fuel, said Li Li, energy research director at ICIS China.

Li said more private companies will be gearing up to meet that growth, as China has been stepping up construction of its LNG infrastructure facilities in recent years.

"Chances are high that there will be more privately owned and operated LNG import terminals, in addition to the current LNG importing receiving terminals, all of which are State-owned, in addition to the Zhoushan terminal," she said.

"There were a lot of procedures involved in getting access to governmental examination and approval before. However, as oil and gas infrastructure and pipelines are undergoing reform, the sector will be more open than ever to the private sector."

Zhoushan port, with a current capacity of 3 million metric tons per year, is expected to achieve annual receiving capacity of 10 million tons after the third phase is completed. Total investment will exceed 10 billion yuan ($1.46 billion).

It is the third LNG terminal to enter operation in China this year. China Petroleum and Chemical Corp's Tianjin LNG terminal entered operation in February, and China National Offshore Oil Corp's Shenzhen, Guangdong province LNG terminal opened in early August.

Both Sinopec and CNOOC are among the largest Stateowned energy companies, along with China National Petroleum Corp.

Analysts said the Zhoushan terminal will allow ENN to source its own gas supplies, rather than purchasing fuel under long-term contracts from the three State-owned energy giants.

All three have been building LNG facilities at an accelerated pace in recent years. Sinopec has vowed to more than double its receiving capacity for LNG imports over the next six years. CNOOC, which built the nation's first LNG terminal in 2006, just saw its ninth LNG terminal enter operation.

Wang Lu, an Asia-Pacific oil and gas analyst at Bloomberg Intelligence, said insufficient domestic production and limited pipeline imports are contributing to the continuous growth in LNG imports.

Imports are likely to see average annual growth of 17 percent between 2017 to 2020, she said, estimating China's dependence on LNG imports to satisfy domestic gas demand will rise to 30 percent in the early 2020s.