(Yicai) May 23 -- As more liquefied natural gas terminals are built in China, there is no need to worry about overcapacity as although the capacity utilization rate of these terminals will be lowered, the additional facilities can serve as LNG reserves and guarantee the country’s energy supply, market insiders told Yicai.

This year’s first new liquefied natural gas terminal, located in Zhangzhou, southeastern Fujian province, was put into operation this week. It brings the number of LNG terminals in operation nationwide to 29 with a combined annual transfer capacity of more than 137 million tons, Huang Qing, chair of consultancy firm CEthinktank, told Yicai.

And there are another 39 LNG stations under construction or being expanded, which will have an annual capacity of 134 million tons when ready, Huang said. Twelve of them should be up and running this year and the rest between next year and 2027. These 12, including the Zhangzhou facility, will add another 45.3 million tons of LNG refueling capacity a year.

As more LNG terminals come online, their average capacity utilization rate is expected to drop to 43 percent from last year’s 51 percent, said Liu Weihua, general manager at the power division of CNOOC Gas & Power. This is far from the peak of 78 percent in 2021. In the years leading up to 2030 the rate should stay at around 45 percent.

Being able to have flexible capacity for LNG storage will be very useful when dealing with emergencies to ensure energy supply, an insider who used to work as a senior executive at Singapore’s ENN Global Trading said.

The LNG supply crisis in Europe in 2022 highlighted the necessity of using LNG terminals for storing reserves, the insider said. Germany was stuck because it had no such facilities when the Russia-Ukraine conflict broke out.

As the capacity utilization rate is lowered, a single facility’s role in reselling imported LNG will be reduced and instead its excess capacity can be used to store LNG, to take part in bonded transfers, or to serve as delivery sites for the futures market, and other activities, the executive said. Some terminals can also be leased to third parties, so that companies in the medium to downstream of this sector can buy LNG directly.

China still imports around 40 percent of its natural gas needs, despite a constant increase in domestic output. China was the world’s biggest LNG importer last year with imports surging 12.6 percent year on year to 71.3 million tons.

“The more facilities, the stiffer the competition,” the executive said. Extra storage capacity will boost rivalry between suppliers of LNG and suppliers of natural gas via pipelines, to ensure prices stay competitive.

Editors: Tang Shihua, Kim Taylor