Secures third of 2019 LNG imports from spot market
Upstream revenues up 5.3% mainly driven by gas
Downstream gas sales volumes, prices rise on year
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Higher downstream sales and prices, combined with an increase in low-cost spot LNG imports at the expense of lower oil-indexed long-term contractual deliveries, have contributed to Sinopec’s revenue growth in the natural gas business, according to market sources.
S&P Global Platts Analytics estimates Chinese LNG importers paid a weighted average price of $9.40/MMBtu for their long-term contracts in 2019, almost double spot prices. S&P Global Platts JKM, the benchmark for spot deliveries into north Asia, averaged $5.49/MMBtu in 2019.
“We will optimize the upstream investment structure in 2020, especially actively promote the development of natural gas business, include raising [natural gas] production, sales and operation efficiency,” a company executive said during a conference call Monday following the release of its 2019 earnings results.
On the production side, Sinopec will continue to increase gas production from its Fuling, Weirong and west-Sichuan gas fields, and accelerate the construction and launch of new gas filling stations in 2020.
Sinopec posted a year-on-year growth of 5.3% in the revenue of exploration and development business in 2019, which was mainly driven by its natural gas business, the company said.
However, revenue from its refining business declined 3.1% on the year in 2019.
“Our natural gas sales volumes and prices in 2019 were both higher year on year,” the executive said, without disclosing further details.
Sinopec was estimated to have sold 27.1 Bcm of natural gas in 2019, up 11.9% year on year, while its natural gas sales price was estimated to have increased 11.6% year on year, according to a report from Beijing Business news.
These have all contributed to the revenue of its exploration and development business, which was estimated to be Yuan 21.07 billion in 2019, up 5.3% year on year, according to the report.
LOWER TERM CONTRACT VOLUMES
Higher spot LNG imports and lower long-term LNG contract volumes are likely to have contributed to Sinopec’s revenue growth in the natural gas business last year, market sources said.
Sinopec was expected to have imported around 15 million mt of LNG in 2019, up by 50% year a year, Platts reported earlier citing data from a Sinopec official.
Meanwhile, the company is estimated to have bought around 10 million mt/year of LNG under long-term contracts from Australia Pacific LNG and PNG LNG projects, according to data from Platts Analytics.
This implies that around one third of the company’s LNG imports could be bought in the spot market, which were priced much lower than long term contract volumes last year.
In comparison, its rivals CNOOC and PetroChina were estimated to have imported 27 million mt and 14 million mt of LNG through their affiliated LNG terminals in 2019, respectively.
Most of these imports are expected to have been bought under the long-term contracts, estimated to be around 24.3 million mt/year and 16.7 million mt/year, respectively, data from Platts Analytics showed.
PetroChina, whose natural gas imports were mostly bought under long-term contracts, posted 23% wider net loss in its imported gas business for 2019, Platts reported previously.