Peiyang Chemical Equipment Co., Ltd.
The Upheaval of International Market and the Dilemma Faced by LNG Project
The Upheaval of International Market and the Dilemma Faced by LNG Project

Since the beginning of this century, China has vigorously introduced LNG due to the need to restructure its energy structure and develop clean energy. Ten LNG reception station projects are planned successively. Former federal reserve chairman Alan Greenspan advised the President to build 40 LNG receiving stations to make up for growing domestic demand for clean energy, and a buying spree has been set up in the international market. Until early 2005, international LNG remained a buyer's market. But by the spring and summer of 2005, that began to change. The price of LNG has been rising, driven by high international oil prices, and its price has been raised from $3 / MMbtu to $6 / MMbtu. The rise in oil prices has spurred demand for natural gas in the United States, the European market is eager to develop new LNG sources because of the decline in north sea gas production. This led to a single market in the international LNG market, which is 75 per cent of Japan, South Korea and China in east Asia, and became a parallel to the us/European LNG market. Together with Japan and South Korea, the contract began to expire in 20 or 25 years in 1985. They are eager to sign new contracts to replace old contracts between 2005 and 2010. These factors have contributed to the transformation of international LNG from buyer's market to seller's market.

When the fob price of LNG climbs from $3 / MMbtu to $6 / MMbtu,the heat value of natural gas and coal in the downstream of China's LNG plants reached 2.5 to 3, which exceeded the internationally accepted threshold of 2.4. The cost of a combined natural gas cycle is also more expensive than the electricity grid companies can provide. Guangdong and Fujian import LNG to generate electricity for 70%-80% downstream market planning into a dilemma. If the remaining 20% to 30% of the gas is used for the city gas, replace the LPG used before, it is no problem; But if the gas or refinery gas is replaced, the price of gas will be raised. In addition, the total amount of city gas is limited, the scale of 3 million tons/year, most of which rely on the city gas, may be difficult to digest. In this case, the LNG project, which is planning to declare its approval to the state, faces a dilemma.

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