Exxon Mobil is looking to take advantage of rising Ching LNG demand by expanding its liquified natural gas operations in Papua New Guinea and Mozambique and building its first import and storage hub in China. Total photo.
China LNG demand rises as Beijing shifts away from coal
Exxon Mobil is turning its attention towards China, even as the Trump administration continues its trade war with Beijing. According to Reuters, the world’s largest publicly traded oil company says it hopes to increase business by building up its Chinese client roster this year.
Exxon is hoping to combine multi-billion dollar production projects like its Papua New Guinea and Mozambique LNG facilities with its first mainland China storage and distribution outlet in Huizhou, located in Guangdong region.
Last month, Exxon said it will participate in the construction of the Huizhou LNG import terminal and provide supplies for the facility. Jason Feer, head of business intelligence at LNG tanker brokers Poten & Partners told Reuters that the deal is “a sign that China is willing to let foreign interests invest in things that in the past were seen as strategic”.
An Exxon manager speaking on condition of anonymity told Reuters this combination “will guarantee us a steady outlet for lots of our LNG for decades”.
“China’s natural gas demand is rising really fast, with imports soaring well over 10 per cent annually at the moment because of the government gasification program and due to fast rising industrial demand, including in petrochemicals,” the Exxon manager told Reuters.
According to Reuters, an Exxon spokesperson declined to comment on the company’s China LNG investments.
The decision to participate in the Huizhou terminal and provide LNG from PNG and Mozambique means Exxon will be able to work around the US – China trade war. In retaliation for Trump administration tariffs on Chinese goods, Beijing recently put a 10 per cent tariff on US natural gas.
The Exxon deal also means China will be able to counter Trump’s complaints about China’s closed markets.
In 2019, China is expected to become the world’s largest importer of natural gas and its LNG imports are forecast to increase by 70 per cent by 2020 from 38.1 million tonnes in 2017, according to SIA Energy, a Beijing consultancy firm.
Last year, in an attempt to cut air pollution, Beijing began shifting millions of households and factories from coal to natural gas for electricity and heating.
Along with the Huizhou LNG terminal, Exxon has also been granted approval for its wholly-owned chemical plant in China. Exxon and BASF are the only two foreign firms to be granted such an approval without a local sponsor.
Huizhou LNG and the chemicals plant are expected to cost $9 billion to build, according to IHS Markit estimates.
Exxon along with other multinational energy companies have begun investing in LNG facilities. This month, Shell along with its partners PETRONAS, PetroChina, Mitsubishi and KOGAS green-lighted the $40 billion LNG Canada project. LNG Canada is expected to export most of its fuel to China.
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