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Gazprom hosts roundtable

on Chinese gas outlook

PERFORMANCE RUSSIA’S Gazprom hosted a three-hour round- cost-competitiveness of its piped supplies to
table to discuss the Chinese gas market’s outlook China next to Central Asian gas and LNG
on July 22. But experts involved in the round- under oil-linked contracts in all three Chinese
table, which included those from the Oxford markets where they are sold.
Institute for Energy Studies (OIES), S&P Global Gazprom brought on stream the Power of
Platts and IHS Markit, cast doubt on how quickly Siberia gas pipeline in December 2019, which
the Russian gas giant would be able to seal a new has since delivered around 1.3 bcm of gas to the
gas supply contract with China. Chinese market. Power of Siberia
Chinese gas demand grew by is due to pump 4-5 bcm of gas this
10% year on year to 304bn cubic year and ramp up to its full 38 bcm
metres in 2019, supported by the per year capacity by 2025. Sberbank
government’s efforts to increase gas Gazprom is CIB estimates that the project could
use at the expense of coal, as well drawing up plans generate an extra $7bn in annual
as strong industrial demand. Con- EBITDA for Gazprom after this
sumption climbed by a further 4% for a second point.
in January through May, Gazprom Gazprom is drawing up plans
said, despite the impact of the coro- pipeline to China for a second pipeline to China
navirus COVID-19 pandemic and running through Mongolia that
subsequent restrictions. via Mongolia that would ship an extra 50 bcm per
Demand is set to rise by 100 would ship an year of gas from fields on the Arctic
bcm every five years, accord- Yamal Peninsula. Gazprom CEO
ing to Gazprom, and double extra 50 bcm per Alexei Miller also recently said that
by 2035. The fastest growing Power of Siberia’s capacity could be
segment will be transportation, year of gas expanded by 6 bcm per year. Taking
owing to the use of gas as a fuel into account piped deliveries from
for heavy duty-trucks, with a compound the Far East as well, this suggests that overall
annual growth rate of 10%. Russian piped supplies to China could reach as
Domestic gas production is also due to grow, 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 tions, the takeaway is that both coal and gas play-
in line with those in CNPC’s latest 2050 ers should take heed of this trend, even if their
energy outlook, published last year. Dur- competition positions in the global gas market
ing the roundtable, Gazprom stressed the are quite strong,” Sberbank CIB said.™

Week 30 30•July•2020 www. NEWSBASE .com P9