Page 6 - FSUOGM Week 30

FSUOGM COMMENTARY FSUOGM

Gazprom hosts roundtable on

Chinese gas outlook

China onlu has long-term supply contracts for 150 bcm of gas in 2035, meaning
there is a 160 bcm shortfall

CHINA RUSSIA’S Gazprom hosted a three-hour round- the cost-competitiveness of its piped supplies to
table to discuss the Chinese gas market’s outlook China next to Central Asian gas and LNG under
WHAT: on July 22. But experts involved in the round- oil-linked contracts in all three Chinese markets
Gazprom has discussed table, which included those from the Oxford where they are sold.
the Chinese gas market's Institute for Energy Studies (OIES), S&P Global Gazprom brought on stream the Power of
prospects with analysts. Platts and IHS Markit, cast doubt on how quickly Siberia gas pipeline in December, which has
the Russian gas giant would be able to seal a new since delivered around 1.3 bcm of gas to the
WHY: gas supply contract with China. Chinese market. Power of Siberia is due to pump
The company claims it Chinese gas demand grew by 10% year on 4-5 bcm of gas this year and ramp up to its full
can one day send up to year to 304bn cubic metres in 2019, supported 38 bcm per year capacity by 2025. Sberbank CIB
130bn cubic metres per by the government’s efforts to increase gas use at estimates that the project could generate an extra
year of gas to China. the expense of coal, as well as strong industrial $7bn in annual EBITDA for Gazprom after this
demand. Consumption climbed by a further 4% point.
WHAT NEXT: in January through May, Gazprom said, despite Gazprom is drawing up plans for a second
While Chinese gas the impact of the coronavirus COVID-19 pan- pipeline to China running through Mongolia
imports are due to rise demic and subsequent restrictions. that would ship an extra 50 bcm per year of gas
considerably, analysts Demand is set to rise by 100 bcm every five from fields on the Arctic Yamal Peninsula. Gaz-
say Bejing is in no rush years, according to Gazprom, and double by prom CEO Alexei Miller also recently said that
to sign contracts for extra 2035. The fastest growing segment will be trans- Power of Siberia’s capacity could be expanded by
Russian gas. portation, owing to the use of gas as a fuel for 6 bcm per year. Taking into account piped deliv-
heavy duty-trucks, with a compound annual eries from the Far East as well, this suggests that
growth rate of 10%. overall Russian piped supplies to China could
Domestic gas production is also due to grow, reach as high as 130 bcm per year eventually.
but at a slower pace, from 181 bcm to 300 bcm However, a further expansion in volumes
by 2035. This means that the amount China will would require new long-term supply con-
need to import will increase by 140 bcm to 310 tracts. China is likely to rely on more LNG spot
bcm. Of that amount, China only has long-term imports, currently selling at record low prices,
contracts in place for 150 bcm of annual supply, in the medium term, meaning Beijing is in no
meaning there is a 160 bcm shortfall. hurry to negotiate more deals with Moscow, the
“In general, there was nearly a consen- experts said.
sus about the superb potential of Chinese gas What is more, IHS presented data showing
demand growth in the long term and about how that renewables had actually become more com-
much gas China would need to import,” Sber- petitive than gas as a power source.
bank CIB, which attended the roundtable, said “Although this conclusion is probably based
in a research note on July 23. on relatively high gas feedstock cost assump-
Most of the forecasts presented were in line tions, the takeaway is that both coal and gas play-
with those in CNPC’s latest 2050 energy outlook, ers should take heed of this trend, even if their
published last year. competition positions in the global gas market
During the roundtable, Gazprom stressed are quite strong,” Sberbank CIB said. ™

P6 www. NEWSBASE .com Week 30 29•July•2020