Russian LNG remains popular with China. China’s supply of Russian LNG reached a record high of about 611,000 tons in August. At issue is China’s continued dependence on Russian hydrocarbon imports.
Large imports of Russian LNG
China has imported six LNG cargoes of about 71,000 tons each from the Russian Yamal LNG terminal. Also, three cargoes of about 62,000 tons each were imported from the Sakhalin LNG terminal.
Yamal’s cargoes are mainly futures volumes. The Sakhalin cargoes were purchased on the spot market through tenders. In addition, these cargoes were likely purchased at a high discount to spot LNG prices.
A source in Guangdong states:
“Chinese NCOs have forward contracts with Yamal LNG. Some of them would have traded cargoes in the market and bought cargoes at low prices in the spot market.”
Hot weather supports Russian gas demand
Strong demand from gas-fired power plants has prompted LNG terminals in the region to stimulate rapid LNG inflows. At the same time, the NCOs, national oil companies, are getting supplies for the winter.
The Jiangsu Rudong LNG terminal recorded sales of about 32 million m3/day of gas last week. Under normal circumstances, sales are about 20 million m3/day.
The temperature in Jiangsu province exceeded 40°C for several consecutive days in August. This led to many of the province’s gas-fired power plants operating at full capacity.
In addition, the volume of natural gas transportation to Jiangsu via PipeChina’s West-East pipeline jumped 30% year-on-year over the summer. In August, PipeChina supplied nearly 400 million m3 of additional natural gas to 27 gas-fired power plants in Jiangsu.
Natural gas-fired power plants in Zhejiang Province also operated at full capacity. This is due to high temperatures as well as a rapid improvement in economic activity.
Sichuan drought worsens power shortage
Drought in Sichuan province has reduced electricity supply in eastern China.
In fact, Sichuan is the largest hydroelectric generator in China. The volume of hydroelectric generation represented 82% of the province’s total electricity generation in 2021.
Nearly one third of the electricity generated in Sichuan is exported to eastern China, mainly Jiangsu, Zhejiang and Shanghai. However, drought and high temperatures have caused Sichuan’s hydropower production to drop by 50% compared to the previous year.
The province suspended power to industrial users from August 15 to 20 and cut transmission outside the province to ensure adequate power to residents. As a result, gas-fired power plants in the region have had to increase their operating rates to compensate for this shortfall.
