CNOOC Sells LNG In Debut Shanghai Auction As China Aims To Boost Supplies
On the 18th April, China National Offshore Oil Corporation (CNOOC) sold cargoes of liquefied natural gas (LNG) on a domestic exchange for the first time, the latest step by China to boost supplies of the clean fuel as the nation shifts away from coal.
CNOOC sold 60,000 tonnes of LNG for delivery in July at prices between 3,380 yuan (US$537.80) to 3,390 yuan per tonne. It sold another 30,000 tonnes for November delivery at between 4,200 yuan and 4,210 yuan per tonne through an auction on the Shanghai Petroleum and Gas Exchange, an official at the exchange and a source briefed on the auction details said.
Prices for November delivery was 200 yuan lower than the spot LNG prices in the same period last year, the source said.
Eighteen bidders took part with the total volume sold within 30 minutes and 12 companies won the bidding, two sources said.
“Interest in the auction was very strong,” he said. He would not disclose the identity of the interested parties.
Although the volume is tiny compared with the nearly 70 million tonnes of natural gas China imported last year, the auction could help Chinese industrial buyers avoid the shortages which occurred this past winter.
Ahead of the winter, China moved millions of residential customers from coal heating to gas heating as part of its fight against air pollution. Supplies, however, were not enough to meet the new demand and industrial users were interrupted to make residential supply available.
Buying forward supplies through auctions like the Shanghai Exchange’s would give factories a chance to lock in prices and gas ahead of the winter heating season.
More auctions would also help build liquidity on the Shanghai Exchange. CNOOC is likely to hold another auction next month, the exchange official said.
China is the world’s third-biggest consumer of natural gas.
The exchange official would not disclose the cargo prices, but said they were “relatively low” compared with market expectations.
Shanghai launched its electronic platform in 2015 to create a pricing benchmark for China’s burgeoning gas market. It faces potential competition from a rival in Chongqing.
Trading volumes on the Shanghai Exchange were thin during its first two years but picked up last year ahead of the gas crunch this past winter.
Source: Rigzone