China’s state-owned oil and gas company Sinopec plans to boost natural gas production by 4.8% in 2022 and continue developing the gas supply chain to meet decarbonization and energy security targets, Chairman Ma Yongsheng said.
“The natural gas business will not only support the company’s transformation, but also generate good profit, because of which we will continuously increase the proportion of clean energy, particularly natural gas, in our overall energy mix,” Ma said at an earnings conference call.
China’s coal-dominated economy has carved out a role for natural gas in its energy transition to a renewables-based power system. The 14th Five Year Plan aims to build gas-fired plants for peak shaving purposes in provinces with favorable conditions and integrate them with local solar and wind plants.
By 2025, the FYP aims to boost natural gas production to 230 Bcm/year, 12% higher than in 2021, with exploration and development of tight gas in the Ordos Basin, and shale gas in the Sichuan Basin and the Tarim Basin listed as key projects for energy security.
Sinopec said it plans to produce 1,256.7 Bcf or 35.59 Bcm natural gas in 2022, up 4.8% from 1,199.44 Bcf or 33.97 Bcm in 2021, which is higher than the growth target of around 3% set by state planner National Development and Reform Commission in the 14th FYP.
However, Sinopec’s 4.8% target is much lower than its growth rate of 11.9% in 2021, data showed.
Sinopec’s natural gas sales volume reached 62.1 Bcm in 2021, of which around 30 Bcm was imported, Vice President Huang Wensheng said, noting that it incurred a loss of around Yuan 6 billion in the LNG business due high LNG costs.
“We will optimize the proportion of LNG medium-to-long term contracts and spot purchases, expand sales to end-users, and carry out hedging for LNG trades to reduce losses from imported LNG,” Huang said.
As an international energy company, Sinopec seeks trading opportunities globally, and meets global supply commitments in accordance with the law, contracts and general commercial principles, Sinopec President Yu Baocai said when asked if it had sold three LNG cargoes to Europe via tender recently.
“We will continue to carry out strict risk assessment on resource procurement and market sales, and then make business decisions prudently in future international trade,” Yu said.
Sinopec plans to raise capital expenditure to Yuan 198 billion in 2022, of which Yuan 81.5 billion will be used for exploration and production, including new capacity in Western Sichuan, Dongsheng and Zhongjiang gas fields, and storage and transmission facilities such as Longkou LNG, the company said.
In comparison, capital expenditure was Yuan 167.9 billion in 2021, of which Yuan 68.1 billion was used in E&P, including production in Western Sichuan, Fuling and Weirong gas fields, and storage and transmission in Tianjin LNG Phase 2 and Qingdao LNG Phase 3.
Sinopec’s Longkou LNG project started construction in November 2021 with 6 million mt/year of capacity in the first phase, and is expected to start operations in November 2024. Its Tianjin LNG terminal phase 2 started construction in January 2019, and is expected to start operations in August 2023 with 11 million mt/year of LNG receiving capacity. It received the first LNG cargo on Dec. 29, 2021.
Source: S&P GlobalTags: China, coal, Decarbonization, LNG, Natural Gas, Sinopec