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China buys rare Norway LNG cargo as spot deals rise ahead of winter

BEIJING (Reuters) — China has bought a rare cargo of LNG from Norway, Reuters shipping data shows, the latest sign that the world's second-largest economy has rushed to increase spot purchases to ensure fuel supplies ahead of the coming winter.

Trade flow data on Thomson Reuters Eikon shows LNG tanker Grace Cosmos, with a cargo of 143,625 cm loaded in Melkoya, Norway, heading to China for delivery on Oct. 30.

It is the first LNG cargo China has bought from Norway since December last year and one of only six in the past 3-1/2 years. Melkoya serves the Snohvit LNG terminal operated by Statoil.

While only a small portion of the billions of cubic meters China imports each year, the deal represents a growing need as Beijing intensifies its war on the choking smog that shrouds the north of the country.

This winter, China will use natural gas to heat millions of homes across the north for the first time, as the government tries to wean the nation off its favorite fuel, coal.

That effort will add an estimated 10 Bcm to China's gas demand, about 5% of its consumption last year and equivalent to Vietnam's annual use.

Concerns about sufficient supplies for such an ambitious project have grown, said a gas researcher from an energy think tank run by China National Petroleum Co (CNPC), the country's top oil and gas group and a major importer.

"We should see more buying on the spot market with more consumption coming from north China," the researcher said.

China bought 22.1 MMt, equivalent to 30 Bcm, of foreign LNG in the first eight months of the year, up 44% from a year ago. Almost half of that came from Australia followed by Qatar.

Data showing September natural gas imports will be released on Friday morning.

An increase in spot buying may give Asian LNG spot prices further upward momentum. They are currently at $8.50 per MMBtu, their highest since mid-January.

A source at China National Offshore Oil Corp, China's biggest LNG importer, said the company has bought more spot cargoes this year because they are cheaper than domestic natural gas production.

Some of CNOOC's term cargoes were resold this year but this was not essential because demand has been solid, the source said.

Other Chinese oil majors, including state-owned refiner Sinopec, resold term LNG supplies or renegotiated deals due to strong competition from cheaper spot supplies.

Reporting by Josephine Mason, Tom Daly and Meng Meng; Editing by Tom Hogue

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Editorial Comment
-Adrienne Blume
The US Energy Information Administration (EIA) reported in April that the US set records for natural gas production in 2017.
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Since market reforms first started in 1978, China has shifted from a centrally planned economy to a market-based economy, experiencing rapid economic and social development.
Industry Perspectives
-Eugene Gerden
Russia aims to ally with Qatar in LNG competition with Australia and other LNG-exporting majors over the coming years.

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