PetroChina Natural Gas Marketing Company
14:50 - 15:15
Wednesday, 18 September 2019
S1.5 Chinese Natural Gas & LNG Demand Expectation Analysis
With the revolutionary breakthrough in the shale gas exploration technology, the United States of America becomes the largest natural gas production country in the world and converted to a net import country in 2017 for the first time in history. Meanwhile, due to Chinese energy structure reform and environment protection policies, Chinese gas consumption boosted in the winter of 2017, which caused a big wave of nation-wide gas shortage. In 2018, Chinese consumption continued to increase at the rate of 18%. It is expected that Chinese demand will continue to increase rapidly in the coming years. Great changes in both supply and demand sides rebuilt the world’s natural gas demand and supply situation completely.
Along with the change, the second wave of LNG liquefaction factory construction has already started in the United States, most of the second wave projects are green-field projects which require more investment. Most of these projects are pending final investment decision. In the meantime, on the other side of the planet, a great LNG receiving terminal construction boom is under way along the Chinese east coast. There are 20 operating LNG terminals now with the total capacity of 70.7 MTPA, 3 in construction stage with the capacity of 9 MTPA and according to incomplete statistics more than 50 in the planning and FSR stage with the total capacity of more than 250 MTPA. Other than import from the sea, major gas pipelines are also under construction and planning stage to source natural gas from Russia and mid-Asian countries.
Although most of the world sees China as a huge consumption market with great potential and feels quite optimistic, there still remains some uncertainties and risks. Firstly, Chinese market is strongly government policy oriented, minor policy changes would have great impact on a multi hundred bcm/year market. Due to the gas shortage in 2017, the National Development and Reform Committee has issued strict orders to regulate the coal-to-gas switch project which would slow down the gas demand increase rate effectively. Secondly, profitability of major oil & gas companies are becoming crucial. With the reform of gas transportation and sales separation, pipeline operation, which is the most steadily profitable part of the gas industry, is taken out of major oil & gas companies, huge deficit in the gas wholesales part due to government price regulation would no longer be tolerated without pipeline profit compensation, big buyers from China tends to be more price concerned.
In conclusion, China will continue to be one of the most important players in the world’s LNG market and requires more international involvement. The world needs to keep a close track to all changes in the Chinese market in order to reach mutually beneficial cooperation.