LNG boom over as China looks to sell out of long-term deals

State-controlled energy giant Sinopec wants to sell some long-term liquefied natural gas (LNG) import deals as a slowing mainland economy makes them unprofitable, sources say, signalling the end of a five-year boom fuelled by rising Chinese demand.

Asia’s thirst for energy has helped drive a “dash for gas” in producer countries from Australia to Canada, with LNG emerging as the fastest growing fuel source since the beginning of the century on the back of soaring Chinese imports.

But just as long-planned projects start to come on stream, the mainland economy is stuttering, which is likely to crimp demand and pull down domestic gas prices to levels that make imports unprofitable.

“We talk about China choking on LNG. There’s just too much coming onto the market,” said Gavin Thompson, head of Asia gas research at Wood Mackenzie.

Analysts say falling crude prices, which have dropped around 40 per cent since June, are another factor weighing on Chinese gas prices.

“Based on the recent fall in oil prices … there is an increased risk that there could be a near-term cut in natural gas price (in China) for the first time,” Bernstein Research said on Tuesday, adding that at lower levels “LNG and pipeline imports make little sense for producers”.