Page 6 - GLNG Week 43

GLNG COMMENTARY GLNG
Chinese gas demand to soar in long term
The country’s demand for natural gas has slowed this year, but may see a resurgence in the coming years following the removal of supply bottlenecks
PERFORMANCE
WHAT:
Gas demand is projected to expand 10% this year to 307 bcm, down from 18% last year.
WHY:
Demand has slowed
as the government has sought to resolve supply bottlenecks.
WHAT NEXT:
Beijing’s gas-to-coal conversion campaign is likely to ramp up as greater supply comes online.
CHINESE natural gas demand is projected to slow this year amid a weakening economy and a government decision in 2018 to rein in its cam- paign to convert coal-fired heating systems to the cleaner burning fuel. But while the country’s consumption is projected to expand by roughly 10% this year, the long-term demand outlook is far more robust.
China’s conversion plans were disrupted by mass shortages of gas across the country in winter 2017-2018, forcing both central and local governments to re-evaluate their plans. Beijing still hopes to increase gas’ share of the primary energy mix from around 7% to 15% by 2030 to help reduce air pollution levels in cities across China.
Consumption will likely increase more quickly from next year, given that the coun- try’s energy suppliers have been working hard to remove the supply bottlenecks apparent in recent periods of peak demand.
Meeting demand
Gas demand is projected to reach 307bn cubic metres this year, up from the 280.3 bcm recorded in 2018, which was an increase of around 18% year on year.
Sinopec’s deputy chief economist, Wu Gang- qiang, explained on October 15 that “the macro- economic situation and the government’s easing [of its] push to the coal-to-gas programme” was
behind the anticipated slowdown.
China’s gross domestic product (GDP) grew
by 6% in the July-September period, down from 6.2% in the previous quarter and the lowest rate of growth since 1992.
Central and provincial governments, mean- while, froze new coal-to-gas conversions in January 2018 following mass shortages that left homes struggling to heat themselves. Hebei Province, for example, suspended its campaign to convert coal-fired boilers until 2020.
This freeze only applied to new projects and, with approvals still in the pipeline, the country still saw 4.8mn new households converted to gas and electricity in 2018 compared with 4mn in 2017.
With fresh supplies being unlocked on the domestic front as well as new import capacity set to come online, however, China is now looking forward to its next wave of conversions. Domes- tic production grew by 8.2% in 2017 to 148 bcm, by 8.8% in 2018 to 161 bcm and is forecast to expand again by 6.1% to 171 bcm this year.
The official Xinhua news agency reported last week that Sinopec had secured 8.81 bcm of gas for northern China during the winter heating season, up 15.5% y/y. China National Offshore Oil Corp. (CNOOC) intends to expand supply by 1.5 bcm to around 24.5 bcm of gas. China National Petroleum Corp. (CNPC) has said it will boost supply this winter from major gas
The advent of Power of Siberia gas flows has caused some speculation that this will dent demand for LNG imports.
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Week 43 31•October•2019