(Bloomberg) -- One of China’s biggest private liquefied natural gas importers is betting it will be cheaper to meet rebounding demand by boosting purchases on the spot market.
ENN Energy Holdings Ltd., one of the few non-state-owned firms to operate an LNG import terminal in the country, has stopped negotiating long-term supply contracts and plans to rely on cheap spot imports for at least the rest of the year, President Zhang Yuying said in an interview Monday. That comes after the benchmark Japan-Korea spot LNG marker dropped more than 60% this year to a record-low.
The company has about 1.1 million tons of LNG a year in long-term contracts, and space for more at its Zhoushan terminal. The company was in talks with exporters for additional term volumes, and had applied for exemptions to tariffs on U.S. imports, Zhang said. Those discussions are now on hold for at least the rest of the year.
In the second half of the year, two key developments will allow the company to take advantage of low spot prices and boost imports, Zhang said. The first is the opening of a sub-sea pipeline to Zhejiang province from its terminal on Zhoushan island. Currently all imports are transported by tanker truck across bridges and are subject to traffic bottlenecks.
The other is the emergence of the China Oil & Gas Pipeline Network Corp., which the government created to take pipeline and terminal assets from the country’s three state-owned giants in order to allow more third-party access to them. Zhang said he believes PipeChina will begin operating LNG terminals by the fourth quarter and give companies like his more chances to bid on import slots.
ENN expects its June gas sales to be 15% higher than the previous year, in line with its 2019 growth, as demand from industrial and power sectors has recovered from virus impacts, Zhang said.
Demand will continue to be bolstered by government efforts to clear air pollution by forcing companies to switch from coal-fired to gas boilers in the major demand centers of Guangdong and Hebei provinces.
The company also sees growth potential from its integrated energy projects, where it supples gas, power and energy services to customers, Zhang said. The company already has 150,000 industrial clients it can pitch the service to, and the sector will likely contribute as much as 8 billion yuan ($1.1 billion) in revenue this year.
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