China gas and power month in brief-December: what is causing gas supply crunches? Report

Insight 04 January 2018

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Report summary

Right after the winter heating season began, gas shortages widely appeared. These supply crunches highlight the lack of co-ordination between supply and demand growth. They also expose some long-lasting problems such as insufficient storage capacity. The situation wasn't helped by Central Asia-China gas flows, which disappointed again. LNG stood out as the most flexible source to respond to demand, but imports were constrained by terminal capacity. In an extreme case, the government had to resort to using coal. Nevertheless, the government's determination to roll out clean winter heating hasn't changed. More balanced and gradual approaches have been proposed. On the power side, the shift to a cleaner generation mix is continuing, despite further ramping down of subsidies for renewables.

Executive summary
Market
- Supply shortage worsens as it spreads to central and southern China
- Power demand faces uncertainties but renewables speed up
Policy
- China launches national carbon market
- NDRC cuts solar power feed-in tariffs
- China maps out five-year winter clean heating plan for the north
Corporate
- Central Asia-China gas flows fail to respond
Smog watch
- Beijing hits 2017 air quality target