* China's LNG imports rose 35 pct in Q1 to 5.62 mln T
* Seen overtaking S.Korea to become second-biggest LNG buyerby 2020
* High prices & shale gas development to challenge China LNGdemand
By Jacob Gronholt-Pedersen
SINGAPORE, May 14 (Reuters) - China's imports of liquefiednatural gas (LNG) are growing at a record pace as it aims to usecleaner fuels to cut smog in big cities, creating a powerful newsource of demand that has the potential to reshape the marketfor the super-chilled gas.
Rising Chinese demand gives LNG producers such as Chevron, Royal Dutch Shell, ExxonMobil andTotal a crucial new sales avenue as they weigh whetherto go ahead with $180 billion in investments into potential newor expanded LNG projects.
Producers face rising costs in Australia - where many LNGprojects are based - and uncertainty about longer-term demand inJapan and South Korea, the world's top two buyers of the fuel.
The Chinese, though, are spending billions of dollars inbuying LNG-related interests overseas and in building new importterminals. LNG imports are up 35 percent to 5.62 million tonnesin the first quarter against the year-ago period, according tocustoms data.
And imports are set to rise by a third this year, accordingto research firm Energy Aspects. They grew 25 percent annuallyover the last four years, Thomson Reuters Point Carbon says.
"Producers are certainly looking at China, because that'sthe only market right now that will offer 2-3 million tonnedeals," said Gavin Thompson, head of Asia Pacific gas and powerat consultancy Wood Mackenzie.
By the end of this decade, China could overtake South Koreato become the world's second-biggest LNG buyer behind Japan.
The consultancy forecasts China's imports to rise to 61million tonnes in 2020 from 18 million tonnes last year, led bysupply from Australia. By comparison, South Korea's state-runKorea Gas Corp (KOGAS) expects demand to rise to 45 milliontonnes by 2020 from 40 million last year.
Japan and South Korea have increased LNG consumption toreplace lost nuclear power, but uncertainty remains about thefuture of idled nuclear plants amid safety and cost concerns.
China's state energy companies, meanwhile, are alreadycompeting for supply by securing equity stakes in projectsacross the globe.
Malaysian state-owned oil firm Petronas said inApril it will sell a 15 percent stake in its $11 billion LNGexport terminal on Canada's Pacific Coast to China's SinopecGroup and state-owned power group China Huadian Corp.
HURDLES TO DEMAND GROWTH
China plans to more than double its natural gas supplycapacity to 400 billion cubic meters per year by 2020. Still,uncertainty remains about the pace of growth in a country whereenergy use is dictated by politics.
And consistently high LNG prices in Asia
Nevertheless, Asian prices are widely expected to fall as anew wave of Australian supply hits the market in the next 3-4years, further boosting Chinese demand, industry observers say.
China's import needs also depend on how successful it is indeveloping its own unconventional gas resources. China, believedto hold the world's largest reserves of shale gas, hopes toreplicate the U.S. production boom.
"Whether or not China develops its own natural gasproduction can make a huge swing in the global demand," saidDavid Carroll, vice president of the International Gas Union.
Until now, at least, it seems China's state energy firmshave focused mostly on securing gas from projects abroad andshipping it to a string of new LNG imports terminals.
Import capacity is slated to rise from the current 31million tonnes per year at nine terminals to over 80 milliontonnes by 2018, when another 15 import terminals either approvedor already under construction begin operations.
Add to that another 13 terminals that are either planned orproposed and capacity could top 110 million tonnes by thebeginning of the next decade. By comparison, Japan last yearimported 87 million tonnes of LNG. (Additional reporting by Jane Chung and Meeyoung Cho in SEOULand Sonali Paul in PERTH; Editing by Muralikumar Anantharaman)