SHPGX Opens 2019 Import Window Bidding Procedure

SCI99

2019-12-25

SHPGX Opens 2019 Import Window Bidding Procedure

On December 23, 2019, SHPGX issued an announcement on its website to inform participants to prepare for the 2019 Import Window Auction, and the qualification and sign-up procedure for 2020 auction also started. Right after, the first deal was made on Dec 24 by CNOOC Gas and Power’s sales branch and Jingran Energy Zhoushan (also known as Sino LNG Zhoushan). According to sources, Sino LNG signed a five-year contract for 20 cargoes and chose long-term cargo for its first delivery in 2020’s April, but the price term is not revealed yet. Sino LNG aims to supply most of those cargoes to domestic industrial users but is also willing to share part of resources with its partners.

After a long and hard negotiation and preparation, the finalized auction subject was set to 5-10 years flexible contracts for one cargo each quarter, and the cargo sources should be CNOOC’s long-term cargoes and customer’s own choices alternately but the customer can now choose which way to be executed for the first cargo. The first delivery is set to 2020’s second quarter after the winter heating season, and if the customer has troubles in overseas cargo seeking, CNOOC also provides agent purchase service. Moreover, the subjects can be multiplied, whilst the bidder seat is also open for group buyers.

SHPGX cooperated with CNOOC on two window auctions for the first time in 2018, and the winners were Zhenhua Oil and Zhejiang Panergy. However, since the seemingly successful beginning, CNOOC intended to change the auction rules of 2019 to persuade bidders to take CNOOC’s long-term cargoes first, which were widely known as around two times expensive as the spot cargo prices in 2019. Therefore, CNOOC’s new solution went cold fast in the market due to the extremely low profitability and feasibility for private buyers, as those buyers may face billions of profit losses before they embrace the spot cargoes, and spot price in two years later may not be as lucrative as it is for now. CNOOC soon reevaluated their solutions and negotiated with SHGPX and other major potential buyers, and eventually, the final solution in the announcement was set to flexible contracts and gave buyers the right to choose long-term or spot cargo for the first shipment. Thus, the first deal for 2019’s auction was achieved sooner after the announcement by Sino LNG, but due to the lack of sourcing capability, Sino LNG chose CNOOC’s long-term cargo for its first delivery.

On another level, COGNPC is in hard talks with CNOOC, Sinopec and CNPC to take over a majority part of their terminals, and stuck in its non-competitiveness obligation as a pure midstream operator, COGNPC is very likely to open more windows to the public, cooperating with SHPGX. By far, the asset transfer still bothers every party, but after this harsh period, which may achieve some progress in 2020, the auction of 2020 terminal window is expected to be much attractive to private buyers, and the qualification and sign-up part of 2020 is expected to be overwhelmed.

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