In a strategic push to become the world’s lowest-cost seller of floating LNG plants, China is planning on a US$7 billion investment spree in this type of projects offshore Africa, Reuters reported on Monday, citing bankers, industry sources, and energy consultants.
Despite the fact that spot LNG prices have dropped by 70 percent since 2014, and are under pressure from new capacity from the U.S. and Australia, China is one of investors that sees the current LNG glut ending at the beginning of the next decade.
Chinese banks are banking on energy markets’ recovery next decade, and unlike Western banks—that are currently reluctant to extend hefty funds to floating LNG projects—China has extended or committed to extend nearly US$4 billion to three FLNG projects offshore Africa. In addition, the Chinese plan to both finance and build production platforms for two more FLNG plants off Africa’s shores, worth a total of US$3 billion, Reuters’ sources say.
“We see a real commitment to FLNG in China both from the construction side and from the LNG consumption side where decreasing costs mean potentially lower cost LNG,” Steve Lowden, chairman of Jersey-based NewAge that has FLNG projects off Congo Republic and Cameroon, told Reuters.
According to bankers, Chinese banks have “very deep pockets” and differ in their lending strategies from the Western banks.
“The difference is that in the West banks lend at the top of the market when they have most liquidity, but in China they’re smarter and put money in at the bottom,” a financier who advises Chinese lenders on LNG shipping deals told Reuters.
China is also involved in the conventional Yamal LNG project in Russia’s Arctic, in which China’s CNPC and Silk Road Fund hold a 20 percent stake and 9.9 percent stake respectively. Chinese banks have provided two 15-year credit line facilities for the total amount of US$10.4 billion (9.3 billion euro) and US$1.43 billion (9.8 billion Chinese yuan). The financing from the Chinese banks is part of the project finance package totaling the equivalent of US$18.4 billion, says Yamal LNG, whose first production is scheduled for this year.
By Tsvetana Paraskova for Oilprice.com