BEIJING/MILAN, Oct 2 (Reuters) – China's energy giants – after years spent scrambling to secure supplies for the world's third-biggest gas market – are being forced to sell a glut of the fuel to buyers in other countries as soaring demand grinds to a halt.
Consumption has been hit by a cooling economy, but also state policies that ensure Chinese pay among the world's highest gas prices, threatening Beijing's targets of curbing pollution and emissions by using more of the clean-burning fuel.
This will increase pressure on Chinese policy makers to speed up planned reforms of its oil and gas sector, as well as weigh on global gas prices.
Chinese state oil firms agreed to a string of long-term liquefied natural gas (LNG) contracts with producers from Qatar to Papua New Guinea, as gas consumption jumped five-fold between 2004 and 2013, but that was before demand growth went from double-digits to less than 3 percent this year.
Faced with a wave of new LNG imports, China's Sinopec Corp is in talks with global firms on selling part of the 7.6 million tonnes per year contracted from 2016 to 2036 at the Australia Pacific LNG (AP LNG) project, said an industry source.
"Many oil majors have been making presentations to Sinopec about how to manage its perceived oversupply from AP LNG," said the source, who declined to be named due to the sensitivity of the issue.
As a buyer and a quarter shareholder in AP LNG, Sinopec had leverage on diverting cargoes away from China, but would still need the consent of other shareholders, said the source.
The company is likely to sell abroad only a chunk of the first few years of output, traders have said.
Sinopec, which does not normally disclose operational matters, did not immediately respond to a request for comment.
Facing similar headwinds, China National Offshore Oil Corporation, or CNOOC, recently concluded its first-ever tender to sell two surplus cargoes to buyers outside China and industry sources said it is holding private talks with counterparts about selling off more in 2016 and beyond.
With the slowdown already forcing state firms to cut back domestic onshore production and delay developing new offshore fields, consultancy SIA Energy said it would take at least five years for state firms to digest the over-contracted volumes
Gas Prices Among World's Highest
Experts put a large part of the blame for the slowdown in China's gas demand on the state's pricing policy, as well as supply and infrastructure bottlenecks.
Oil giants PetroChina, CNOOC and Sinopec dominate domestic production and imports, and while the state sets a price ceiling they have little motivation to cut prices even when demand falls.
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