LNG macro analysis, page-1658

Foxconn forms new LNG joint venture with affiliate IDG Energy

The new JV Jusda Energy Technology Shanghai is 51% owned by Foxconn’s unit Jusda Supply Chain Management International which invested RMB 102 million and is 39% owned by IDG Energy. The remaining 10% stake has been taken up by the new JV’s management.

All three parties hold a pre-emptive right to further invest into the venture with the total final investment not exceeding RMB 500 million.

It will help customers obtain LNG resources in North American and Asia Pacific via IDG’s network, while, Jusda, which is Foxconn’s logistics chain management network will take on the role of distributing these resources through its transport network.

Currently, LNG logistics in China mainly centers around specialized road vehicles, ships and receiving stations which are dominated by the China’s major state-owned oil companies. The new JV plans to work around this by using shipping terminals and transport containers. Through this, the gas can be shipped via land, rail or waterways at a reduced cost.

This JV is the latest in a series of moves by Foxconn to enter China’s energy market.

95,000 foreign-funded projects launched in Shanghai since China’s reforms and opening up

According to statistics released by the Shanghai Municipal Commission of Commerce, Shanghai has attracted 95,000 foreign-funded projects worth USD 237.6 billion since China announced reforms and opening up of its economy.

Shang Yuying of the Shanghai Municipal Commission of Commerce has highlighted the importance of foreign companies in driving Shanghai's economic development, Foreign-funded enterprises in Shanghai have contributed more than 25% of the city's economic output and over 33% of the city's tax revenue in 2017.

More than 50% of these foreign-funded enterprises in Shanghai, when surveyed, have seen China as their most important overseas market. The top 100 foreign-funded companies in Shanghai have reaped in a total revenue of USD 423.5 billion in 2017, up 18.8% from the previous year. Exports and imports by these companies have also reached USD 169.9 billion in the same period, up 9.83% from the previous year.

Profit warnings issued by hundreds of Chinese companies

More than 280 Chinese companies revised their earnings outlooks estimates for 2018 as they gave preliminary announcements. The companies covered all industrials from airlines to small-scale household goods suppliers.

With Wednesday’s disclosures and according to Bloomberg's analysis of the data, more than 370 of the 2,400 Chinese companies warned of a loss for last year. About 86% of these companies were profitable the year before. 59 firms revised down their earnings by more than 66 per cent.

These companies cited China’s economic slowdown, along with changes in the accounting system as the reason for earnings revision.

"Private companies are particularly vulnerable to the economic downturn. The deleveraging campaign and the deterioration of their corporate health are normal for an economy that is shifting gears and slowing down,” said Lv Changshun, a money manager at Beijing Dajun Zhimeng Investment Management Co.

Mr Yu Dingheng, a fund manager at Shenzhen Flying Tiger Investment & Management Ltd, explained that “We’re only just seeing the beginning of deterioration in corporate earnings as the economy slows further,” “Things will continue to go downhill for firms seeing business slowing and even as the macro-economy recovers, these individual firms will never be what they were.”

China increases capital market access for foreign institutions

China further increased foreign institutions’ access to its capital markets by combining its two inbound investment schemes while also broadening their scope of investment to also include derivatives, bond repurchases and private funds.

Under the new draft rules published by the China Securities Regulatory Commission (CSRC), the Qualified Foreign Institutional Investor (QFII) and the yuan-denominated RMB Qualified Foreign Institutional Investor (RQFII) schemes will be combined with the threshold for overseas applicants lowered and the vetting process simplified.

The new rules aim to further open China’s capital markets and introduce more long-term overseas capital to the country as it continues to battle with a slowing economy.


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Polish LNG terminal operator, Polskie LNG, said it has completed the first ISO-container loading at the President Lech Kaczyński LNG import facility.

The ISO-container loading marks the start of operation of the transshipment LNG installation for railroad tank cars and ISO containers, Polskie LNG said in its statement.

Speaking of the loading, Polskie LNG’s president Paweł Jakubowski said the company’s goal is to build the market in Poland as well as its portfolio of services provided by the company.

The newly launched addition to the terminal that will enable the customers to use the chilled fuel without the need for much additional infrastructure, he said.

During the operation, two tons of LNG were loaded into the 40-foot ISO container.

The operator continues the expansion of its terminal and when completed the facility will be able to load LNG into ISO tanks for railroad cars.

Changfeng Energy, Chinese energy provider completed its trial run of a liquefied natural gas (LNG) shipment from Canada to China using ISO-containers.

The LNG shipment from the Vancouver port was arranged by Changfeng and it arrived at the Shanghai port on November 8, 2018, and has now cleared customs.

The company said that LNG exported to China was procured by Changfeng from a British Columbia-based energy provider, and Sanya Changfeng Offshore Natural Gas Distribution, a unit of Changfeng, is the importer.

The LNG received in Shanghai will be sold to Hebei Riheng Clean Energy, another Changfeng unit, and will be transported to Hebei to support the LNG distribution services of Riheng Energy to areas where pipeline gas is not accessible.

Changfeng had obtained an export order from the Canadian National Energy Board for the LNG export and Sanya Changfeng had received all necessary permits for the LNG import in China.

According to the recent energy reform policies of the Chinese government, the country is shifting away from a coal-based economy and is increasingly relying on natural gas as the source of energy consumption.

In particular, Changfeng said that, in the winter months due to higher demand for natural gas required for heating in China, the available supply of natural gas may be lower and trucked LNG prices may increase.

Based on Wood Mackenzie estimates, trucks carried approximately 19 million tons of LNG to customers last year, accounting for 12 percent of China’s total LNG consumption.

Further, unlike the market price of pipeline gas, which is regulated by the Chinese government, LNG prices are relatively deregulated and market-oriented.

Accordingly, the company has been seeking to broaden its supply base beyond that of China, to sources such as Canada, in order to benefit from opportunities in respect of LNG supply.

As a Canadian-listed energy company operating in China, the company recognizes the potential synergy of Sino-Canadian energy trading and natural gas supply, and has taken steps such as the aforementioned trial run LNG shipment to position the company to seize such opportunities, Changfeng said.

Spanish LNG terminal operator, Enagás, said the CORE LNGas hive project carried out the first pilot test of multimodal transport of liquefied natural gas (LNG) in Europe.

The pilot project consisted of transporting LNG in an ISO container from Huelva to Melilla, by road, rail and sea, Enagás said in a statement on Monday.

The LNG was loaded into the ISO container at the Enagás regasification plant located in the Port of Huelva. From there, it was transported by truck to the Huelva Port railway terminal, where it was transferred to a train.

The train traveled to Majarabique station in Seville, and from there it was transported by truck to the Port of Algeciras in Cadiz. There, it was transferred to a vessel which made the journey from Algeciras to Melilla, Enagás said.

This pilot test highlighted the effectiveness of transporting LNG in ISO containers as well as the efficiency of the railway as a logistics solution capable of responding to growing LNG fuel demand.

Partners in the CORE LNGas hive pilot project are Enagás, Renfe Mercancías, Cepsa, the Port Authorities of Bahía de Algeciras, Huelva, Melilla and Cartagena.

Also, the project had the collaboration of Crisergas, which carried out the transport operations of the ISO container under the logistic supervision of Cepsa, and the company Setolazar, owner of the ISO container.

The aim of the CORE LNGas hive project, which is co-funded by the European Commission, is to develop the necessary logistics to drive the supply of LNG as a fuel in the transport sector in the Iberian Peninsula.

Led by the Spanish Ports Authority and coordinated by Enagás, this project has a total of 42 partners from Spain and Portugal: 8 institutional partners, 13 port authorities and 21 industrial partners.

Japanese gas utility Shizuoka Gas signed an LNG sale and purchase agreement with Clean Energy in China for the delivery of chilled fuel from the Shimizu LNG terminal in ISO containers.

Shizuoka Gas has been seeking further utilization of Shimizu LNG terminal since 2017 when it made a success of reloading LNG through the reloading facility.

Under the terms of the deal, Shizuoka Gas would be supplying 1600 metric tons of LNG on an annual basis for a three year period spanning from 2019 to 2021.

This is the first binding term contract in Japan to transport LNG through ISO tank containers to China where gas demand is rapidly increasing. Shizuoka Gas said in a statement.

LNG to be supplied from Shizuoka Gas would be delivered to Taishan Gas Group and Rizhao Public Transport Group in China through Clean Energy and Ants Energy as an LNG selling unit of Dalian Inteh Holdings.

www.lngworldnews.com

A first in the industry, 130 LNG tank containers are shipped to northern China

SHENZHEN, China, Nov. 29, 2018 A feeder container ship loaded with 130 LNG tank containers sailed northward from the Port of Yangpu of Hainan Province to the Port of Jinzhou in November. The innovative transportation of liquefied natural gas (LNG), a trial project jointly approved by China's National Development and Reform Commission (NDRC), National Energy Administration (NEA) and Ministry of Transport (MOT), is the country's first-ever attempt to transport the surplus capacity of Hainan terminal to its northern part via LNG tank containers, and it is of significant importance to satisfy the demands for winter heating with clean energy and ensure the LNG supply in northern China.

It is noteworthy that the 130 LNG tank containers were developed and manufactured by CIMC ENRIC.


China is fully committed to the construction of a natural gas production, supply, storage and marketing system

The tighter availability of natural gas faced by a large part of China last winter and this spring has fully revealed the country's lack of natural gas storage ability, and the problem will become even worse owing to China's rising demand for natural gas. So far, the escalating conflict between supply and demand has greatly restrained sustainable development of the domestic natural gas industry.

China has seen an explosive growth of natural gas consumption over the years, and it is challenging to meet the country's demand for natural gas, especially in the heating season.

Amidst the widening supply-demand gap, LNG has become a major method for natural gas.

According to Wood Mackenzie, China's LNG imports are forecast at nearly 50 million metric tons in 2018, an increase of 12 million tons over 2017.

The International Energy Agency (IEA) indicated in Gas 2018- the latest IEA annual market report that by 2019, China will become the world's largest importer of natural gas, and by 2023, it will import 171 billion cubic meters of natural gas, with LNG accounting for more than 50 percent of the total imports.

In recent years, the Chinese government has been accelerating construction of the natural gas production, supply, storage and marketing system to meet its rising demands for natural gas and alleviate growing natural gas shortages.

In April 2018, the NDRC and the NEA jointly issued the "Opinion on Accelerating the Construction of Gas Storage Facilities" and "Improving the Market Mechanism on the Supportive Services of Gas Storage and Peak Load Adjustment", stating that the improvement of gas storage and peak shaving ability is an important part of promoting the construction of the natural gas production, supply, storage and marketing system, and calling for the construction of a multi-tiered gas storage and peak shaving system based on interlinked pipe networks, with underground gas storage reservoir and coastal LNG terminals serving as the major part, centralized and large-size LNG storage tanks in key inland areas as the minor part, and gas field peak load adjustment, interruptible provision, alternative energy and other adjustment means as the supportive part.

"Previously, LNG was merely used for the purpose of peak load adjustment in China; today, it is considered as one of major gas sources due to the tighter natural gas supply. And this is good. However, most of the LNG infrastructure with terminal stations as the core is distributed in the southern part of China, such as Hainan Province, Shenzhen Municipality and Guangxi Zhuang Autonomous Region. This can only help a little in alleviating natural gas shortages in the heating season in the country's northern part. Therefore, the south-to-north natural gas transportation means a lot for China and it is a strategically important link in building the natural gas production, supply, storage and marketing system," said Yongsheng Xu, General Manager of Nantong CIMC Energy Equipment CO., LTD.

CIMC's ship tank container proves be the best match for LNG transportation

To transport natural gas from south-to-north, there are two options: the commonly used pipelines and the popular non-pipeline model from the central and western parts of China.

"Though the existing pipelines and tank cars have played important roles in south-to-north natural gas transportation, they cannot yet fully handle the surplus capacity of terminals in the southern part of China. In this case, persistent efforts must be done to innovate natural gas transportation models and further promote the building of the natural gas production, supply, storage and marketing system," said Yongsheng Xu of CIMC ENRIC.

"The transportation of LNG via tank containers is an innovative way and effective supplement to natural gas transportation. It is flexible, quick and a low-cost investment with short-term gains. Once the rail-sea-road-rail transport achieves significant breakthroughs, it will have more potential."

Well-suited for storage and transportation, the 130 LNG tank containers produced by CIMC ENRIC have successfully transported the large volume of surplus natural gas from south-to-north via ships, with the gasification capacity of a single tank container reaching 25,000 cubic meters.

As a standardized carrier, the LNG tank container enjoys unique advantages in the whole industrial chain of natural gas, which is an optimization and supplement of the traditional industrial chain and becomes a new measure for securing winter gas supply in China.

Large-scale LNG transportation is characterized by large volume, extensive coverage, flexibility, safety, low-cost investment, short-term gains, etc. Once such intermodal transport works on a large scale and gets widely commercialized, it will extend to inland markets and exert far-reaching influence on the LNG industry.

"In terms of safety, multiple tests by professional testing agencies have proved that our LNG tank containers have a solid and reliable structure. They will not damage liquid commodities inside and will prolong the storage life of the commodities. At the same time, CIMC ENRIC has specially installed intelligent monitoring devices in each tank container, so as to ensure the real-time monitoring of liquid level, temperature and location of the tank container during stacking, loading and unloading and transporting. By doing so, the safety through the entire transportation process has been tremendously improved," stated Yongsheng Xu.

In addition, with its larger application scope and stronger adaptability performance, the new LNG tank container transportation model can be further extended to railway, road and water transportation; achieve the door-to-door supply from terminals to users and deliver natural gas to areas not covered by existing pipe networks; further improve the country's natural gas storage and supply capacity; and become a method vital for national well-being, the people's livelihood and the country's energy security.


CIMC is proud of its best-of the-class LNG tank container technology and optimistic about the market prospects

"There is no doubt that the south-to-north natural gas transportation and intermodal transportation via tank containers will create a new business operating model in the LNG supply chain for the whole market, as our clients and we both believe that China is taking steps to make the transportation of LNG via tank containers as one of important approaches to ensure the successful supply of natural gas in the heating season," said Yongsheng Xu, "it is the great confidence in the forthcoming market boom that drives China LNG Group to place bulk orders on LNG tank containers with us."


"The first-ever successful transportation of LNG via ship tank containers has demonstrated CIMC ENRIC's exceptional competence in product R&D and service provision, and it will make great contributions toward having a sufficient natural gas supply in northern China," said Yongsheng Xu. "As China continues to speed up constructing the natural gas production, supply, storage and marketing system and deepening the natural gas transmission models, CIMC's LNG tank container business will have bright development prospects."

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