Page 11 - AsianOil Week 07 2023

AsianOil POLICY AsianOil

Increased LNG orders in China mask

rural shortages

CHINA DESPITE much being made of China’s post- prices combined, with the result that upstream
COVID recovery and increased LNG orders suppliers incurred significant losses.
Gas supply is needed of late, the increase in gas flow to China is also Central governmental imposed capping reg-
to alleviate shortages in needed to help alleviate shortages in some of the ulations on residential use gas supplies means
the country’s more rural country’s more rural areas. that prices are not permitted to be higher than
areas. The nation’s Hebei province, a large pocket provincial city use prices. This has long compli-
of land surrounding Beijing is a prime example. cated supply issues across China.
Rural areas of the province, home to around As a result, some of China’s biggest suppliers
75 million but with 40% of the population such as China Gas have been wary of agreeing
employed in agriculture and forestry related to smaller-scale, short term contracts; a problem
industries, have seen severe gas shortages for the that hit home primarily in the more rural areas
past three months with rare anti-government of the province.
protests erupting in isolated cases. As China’s third largest gas supplier, China
Officially these shortages have been put down Gas is a Hong Kong based firm with infrastruc-
to limited inbound LNG and upstream agencies ture and large-scale supply interests in 30 Chi-
in the industry preferring to put in place longer nese provinces. Only Kunlun Energy and ENN
term contracts with more influential customers Energy, supply more of the nation’s 1.4 bn pop-
on the industrial east coast than regional govern- ulation with gas.
ments in rural China. Sources in China do now point to a corner
State media in some parts of China has now having been turned with central government
started to report on the issue, in what is seen as awareness of the issue.
a marker of just how serious the central govern- As such, there are now signs in Hebei Prov-
ment is taking the problem. ince at least that supplies next winter and in the
Shortages in Hebei were first reported in the years following will be guaranteed, with China
late autumn of 2022, continuing until mid-Jan- Gas last year agreeing to two long-term LNG
uary this year according to Chinese language contracts with US sellers; one a 25-year deal with
media. Energy Transfer for 0.7 million metric tonnes
Problems faced by those looking to purchase per annum (mtpa) from 2026, and a second,
gas centered on lack of supply or frequent inter- larger deal with NextDecade for 1 mn mtpa from
ruptions in flow to many parts of the province. the year after. ™
Gas is the single most widely used fuel in large
areas of China’s north east.
Social media in the country was suddenly
awash with accounts complaining about sup-
ply issues with some reports that residents were
forced into the surrounding forests to collect
wood for fuel.
The local provincial government responded
by accusing suppliers such as one of the area’s
main suppliers, China Gas Holding Co Ltd, for
not confirming supplies ahead of the winter
months.
In similar form , blame was also attributed to
aging and outdated infrastructure with local gov-
ernment members in Wangdu County, Hebei,
pointing to broken pipelines and no alternative
measures in place to guarantee supply.
Making matters worse in recent days at the
local level are nationwide projections of LNG
purchases for the year ahead between 9 and 14%
up on last year, amounting to more than 70 mil-
lion tons.
It is not the first time China has hidden local
gas infrastructure woes and supply issues behind
large-scale orders on international markets.
In late 2017, again in Hebei Province, issues
with coal to gas switching and limited gas
imports coupled to local caps on downstream gas

Week 07 16•February•2023 www. NEWSBASE .com P11