China faces another winter gas supply deficit

13 September 2018, Week 36, Issue 710

China is set to experience another substantial winter natural gas supply deficit this coming as government calls for clean energy use intensify.

Industry officials familiar with the state majors’ gas supply capabilities told a recent seminar in Beijing that the supply shortage could be as much as 15 bcm during this year’s winter season.

However, they added that the shortfall would not see a repeat of distributors such as China National Petroleum Corp. (CNPC) slashing supplies to industrial customers, which forced factories to suspend operations by local authorities to freeze the conversion of coal-fired boilers to gas.

“This is because the National Development and Reform Commission [NDRC] is well prepared and has urged the national oil companies [NOCs] to increase supply through increased domestic production and pipeline gas and LNG imports,”  said one source.

CNPC has raised gas output from the Sulige tight gas field to 0.1 bcm per day, according to sources.

The gas supply from Central Asian countries such as Kazakhstan will be expanded this winter, the NDRC said in a recent press conference without specifying the size of the increase.

In the meantime, the state majors stepped up their activity on the LNG spot market this month despite the intensifying trade war with the US.

To ensure enough gas supplies, the government has encouraged state-owned enterprises to open their LNG facilities to third-party access (TPA) and link the pipelines between different terminals in order to swap their imports to regions with higher demand.

China National Offshore Oil Corp. (CNOOC), which is China’s largest LNG importer, is now tendering a window period in October at its LNG terminal in Jieyang City in southern China’s Guangdong Province. It is the first such move by one of the state-owned energy companies to list their window period on the Shanghai Oil and Gas Exchange.

China’s majors have historically opposed TPA at existing terminals over concerns that opening the facilities to independents will lead to a loss in market share.

Edited by

Andrew Kemp

Editor

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