Building an LNG Resource Pool to Empower and Accelerate Industrial Chain Development

China’s three major petroleum companies import LNG primarily to meet domestic demand. Meanwhile, sellers—seeking to prevent buyers from arbitraging across different markets and thereby harming their interests—generally require delivery-at-destination terms. As a result, LNG resource destinations are mostly fixed, and long-term contract resources are predominantly supplied to the domestic market, with only a small portion resold internationally. Pricing Mechanisms Help Diversify Risk Regarding LNG resource pricing mechanisms, Shell and BP employ more diversified approaches in their long-term contracts: in addition to oil- and gas-price indexing, they also utilize equity take-off, hybrid pricing, and netback pricing. Shell, in particular, maintains a relatively balanced mix across these pricing methods—helping diversify risk and enabling effective hedging among different pricing mechanisms. In contrast, during their early development stages, China’s three major petroleum companies predominantly indexed their long-term LNG contracts to oil prices. Only CNOOC has a small share of resources from bundled suppliers priced via a hybrid of oil prices and U.S. Henry Hub natural gas prices. In recent years, as U.S. resources have been increasingly introduced, pricing mechanisms linked to U.S. Henry Hub gas prices and other gas benchmarks have grown—but overall, pricing remains relatively singular and highly susceptible to oil price volatility. China’s Oil & Gas Enterprises Still Have Significant Potential in Building LNG Resource Pools Compared with international oil companies in terms of overall scale and industrial chain integration, China’s oil & gas enterprises still possess substantial potential for developing LNG resource pools. The three major international oil companies—Shell, TotalEnergies, and BP—hold large-scale assets across all segments of the LNG value chain. This reflects their dual roles as resource suppliers and traders, as well as decades of deep involvement in global oil and gas exploration and development. Starting from natural gas production, they extend upstream activities—from developing gas fields to producing and exporting LNG; supply feed gas to multiple liquefaction projects; hold equity stakes in liquefaction terminals operating across several countries, securing entitled production capacity; build globally integrated LNG resource pools and conduct worldwide sales; expand regasification capacity to channel resources toward higher-margin markets; and develop downstream demand—such as marine LNG applications. Their vertically integrated, end-to-end industrial chains feature coordinated advancement across all segments, forming a comprehensive and mature value-chain layout. Japan and South Korea—as LNG buyers—have built extensive asset portfolios in LNG procurement agreements and regasification terminals. However, two key differences distinguish them from China’s three major petroleum companies: first, Japanese enterprises began participating in global LNG liquefaction terminal development as early as the 1970s, resulting in comparatively larger asset holdings at this stage; second, Japan’s LNG market has matured, enabling enterprises to allocate part of their LNG resources—under long-term contracts—to smaller firms, thus optimizing their existing LNG resource pools. By contrast, China’s three major petroleum companies entered the LNG business relatively late, concentrating their assets mainly in LNG procurement agreements and regasification terminals. They entered the value chain from the mid- and downstream segments, focusing on developing those areas: importing LNG under long-term contracts, constructing domestic receiving terminals, acquiring minority stakes in liquefaction terminals, and making selective investments in end-use sectors such as natural gas power generation and city gas distribution—while upstream expansion remains limited.

Gegelge Daily – September 20

1. China will build a BeiDou Integrated Positioning, Navigation, and Timing (PNT) System: Next, China will construct an integrated BeiDou PNT system to better serve global users. The successful deployment of the BeiDou-3 system has laid a solid foundation for the development of the next-generation BeiDou system. 2. Upon completion of the integrated PNT system, China plans—by 2025—to establish a low-Earth-orbit (LEO) satellite constellation based on the BeiDou system, further expanding the coverage of high-precision services and enabling centimeter-level BeiDou positioning globally. 3. XPeng HT “Land Aircraft Carrier” Flying Vehicle Enters Full Airworthiness Review Phase: The conference announced the formal establishment of the X3-F Project Type Certification Board and confirmed its review team members. The airworthiness review work is undertaken by the Guangzhou Aircraft Certification Branch of the Civil Aviation Administration of China. 4. China’s First Solar-Hydrogen-Powered UAV Successfully Completes Maiden Flight in Chongqing: Developed independently by the Yixiang UAV Team under the Harbin Institute of Technology (HIT) Chongqing Research Institute, China’s first solar-hydrogen-powered unmanned aerial vehicle successfully completed its maiden flight at Mingyue Lake in the Liangjiang Collaborative Innovation Zone, Chongqing.

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