Statistics from organizations such as the International Gas Union (IGU) and Wood Mackenzie show that a total of seven liquefied natural gas (LNG) projects around the world are scheduled to be completed and put into production this year. Among them, the production capacity of new LNG projects in Australia such as Gorgon, Gladstone and Asia Pacific alone exceeds 40 million tons. The increase in LNG production capacity will continue to reduce LNG prices in Asia, and at the same time bring intense pressure to compete for market share in the Asian market. For China, the continued growth of LNG production capacity may have more benefits than disadvantages and will reduce operating costs for domestic oil companies.

international impact

The seven LNG projects are: Algerian National Petroleum Company's Alze project in the country, ExxonMobil's Papua New Guinea project's second liquefaction production line, ExxonMobil's Australian Gorgon project's first liquefaction production line, British Gas Group The second liquefaction production line of the Queensland-Curtis project in Australia, the first liquefaction production line of the Gladstone project of Australia's Santos Company, the first liquefaction production line of the Australia Asia-Pacific project of ConocoPhillips and other companies, and the Donggi Senoro project in Indonesia. These seven projects will have a greater impact on the global natural gas supply market in 2015.

From the perspective of supply and price, the seven major LNG projects have huge production capacity after being put into operation, which may lead to an oversupply of LNG in the future. Against the background of relatively weak LNG market demand due to the current weak global economic recovery, the growth of LNG market supply will inevitably lead to lower prices. The market generally believes that the Asian LNG market price may drop by as much as 30% in 2015.

From a market perspective, with the exception of the Alzer project, other LNG projects are mainly concentrated in Australia and Southeast Asia, and their supply target markets are China, Japan, South Korea, India and other countries. However, the LNG import volume of major Asian consumer countries has shown a weak growth in 2014: South Korea's LNG import volume fell sharply by 9% compared with 2013; China's LNG import growth rate dropped from 23% in 2013 due to factors such as economic slowdown. It dropped to 14% in 2014, which is far lower than market expectations; India's LNG imports increased slightly by 2% compared with 2013. The lack of receiving devices is the main reason that limits the substantial growth of its LNG imports. Therefore, the new LNG production capacity will bring fiercer market share and price competition to the Asian natural gas market.

From the perspective of oil companies, the continued increase in global LNG production capacity will have an impact on the adjustment of their production operations and development strategies. First of all, the continued growth of newly built production capacity has caused the global LNG market price to show a downward trend. Petroleum companies are facing greater market pressure in developing LNG resources, and their enthusiasm for investing in LNG in the future has been significantly reduced. British Gas Group has announced a significant reduction in investment in LNG projects; Petronas has also repeatedly stated that it will work hard to reduce expenditures on its Canadian Northwest Pacific LNG project. Secondly, the continued increase in global LNG production capacity will amplify its disadvantages such as large initial investment and long return cycle. During the current period of continued low international oil prices, in order to recover funds, maintain good financial performance, and attract the attention of investors, some oil companies have also chosen to divest LNG projects as non-core assets. Apache Petroleum Company withdrew from the Kitimat LNG project in British Columbia, Canada in 2014.

Impact on China

While China's economy continues to develop rapidly, the energy to support the economy is relatively scarce and the structure is relatively simple. Global LNG production capacity continues to grow and prices continue to fall, which will help China increase LNG imports and consumption. It will also play an important role in optimizing the energy structure, solving the dual problems of energy supply security and ecological environmental protection, and achieving sustainable economic and social development. At the same time, the growth of global LNG production capacity provides a good external environment for China to further introduce and utilize LNG resources, and is also conducive to the diversification of natural gas imports.

From a price perspective, China's LNG import costs have been relatively high in recent years, putting great pressure on oil companies. The increase in global LNG production capacity and the lowering of Asian market prices will reduce the burden on Chinese LNG importing companies and make profits. Taking CNOOC as an example, the actual LNG import volume in 2013 was as high as 13.01 million tons, and the LNG import capacity will reach 40 million tons in 2015. Lower LNG prices can save the company a lot of costs. In addition, the average LNG import price of PetroChina in 2013 was US$846.89/ton. Due to the inversion between domestic gas prices and imported gas prices, PetroChina suffered a loss of 20.281 billion yuan in imported LNG that year. Lower imported LNG prices in the future will make up for the losses to a certain extent.

China imports natural gas mainly through two methods, namely maritime and onshore pipeline transportation. In 2014, China imported 31 billion cubic meters of pipeline gas, accounting for 52.5% of total natural gas imports, mainly natural gas from Turkmenistan, with a small amount imported from Uzbekistan, Myanmar, and Kazakhstan. From the perspective of imported resources, imported pipeline natural gas and LNG are equally matched; from the perspective of import prices, the pricing of the two also refers to each other. During the most critical period of China-Russia natural gas negotiations on the eastern route in 2014, Russia repeatedly blew the whistle, claiming that its price was far lower than the LNG import price along the eastern coast. In fact, due to the homogenization of natural gas market consumption, there are differences in the pricing mechanisms of pipeline gas and LNG. Changes in one of the prices will inevitably lead to changes in gas prices in the entire consumer market. Therefore, the increase in global LNG production capacity will lead to a lower price of imported LNG in China, which will be transmitted through the internal pricing mechanism of the consumer market, which will help promote the overall reduction of China's natural gas market price.

In recent years, with the success of the U.S. shale gas revolution and the active promotion of its experience around the world, China has also attached special importance to the development of shale gas resources. However, in terms of development costs, China is much higher than the United States, and it needs to rely more on national policy support and a relatively high natural gas market price environment. As global LNG production capacity growth drives down imported gas prices, China's natural gas market prices are expected to continue to fall, which is not conducive to creating a market environment suitable for the development of shale gas. In addition, consumption areas such as Guangdong and Shanghai are currently important gas transmission target markets for resource areas such as Sichuan and Chongqing in the future. However, international LNG prices continue to fall. The former prefer to import LNG with flexible purchase and sales. The market space for the future development of shale gas may be affected by Influence. Therefore, in order to reduce the adverse impact of global LNG production capacity growth on China's shale gas development, attention must be paid to coordinating supply resources and market demand.

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