As China’s government pushes for a ramp-up in natural gas storage construction to help meet high winter demand, state-owned China National Offshore Oil Corp. (CNOOC) has opened the country’s first bonded LNG store with the aim of re-exporting the commodity for profit.
Subsidiary CNOOC Gas and Power opened a bonded storage facility on Hainan Province earlier this month. The store was stocked with 69,000 tonnes of LNG imported from Indonesia, a statement from the State-Owned Assets Supervision and Administration Commission (SASAC) said.
Bonded storage permits CNOOC to hold the LNG cargo without paying the VAT applicable to imported gas destined for the domestic market. This makes it more economical to re-export the gas if the sales market is advantageous.
The move comes as China’s state majors make slow progress in expanding storage capacity for gas destined for the rapidly growing home market.
Capacity currently stands at 7.8 bcm, or 3.3% of national annual demand, state-owned China National Petroleum Corporation (CNPC) said in March.
The National Development and Reform Commission (NDRC) recently set a storage expansion target for 2020 of 15 bcm, but this may only meet around 6% of demand. Storage capacity in European gas importing countries averages about 11% while in the US this figure is 17%.
CNOOC, the country’s biggest LNG importer with nine terminals, is understood to be seeking licences to build more bonded storage capacity for cargoes that it could potentially re-export.
CNOOC Gas and Power imported more than 20 million tonnes of LNG in 2017, almost 55% of the country’s total imports, China Daily said this week.
“[CNOOC] said it plans to set up more LNG terminals in Fujian, Jiangsu and Zhejiang provinces and enlarge the current LNG terminal in Tianjin to increase its receiving capacity,” the state newspaper added.
One of the issues behind northern China’s supply shortages last winter was the inability of state-run LNG import terminals to keep pace with demand.