China gas and power month in brief-September: heading into a tight winter market Report

Insight 30 September 2017

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Report summary

China’s gas demand and LNG imports surged dramatically in August. As the weather gets colder and new demand emerges from fuel switching, the natural gas market is going to be tighter in Q4. It is likely that fewer TPA schedules will be left for emerging LNG buyers as the market has already seen high auctioned gas prices and busier terminals are expected during the winter. Power demand has started to lose momentum after experiencing a record high in July. This is mainly because of production cuts in heavy industries under a tighter environmental policy in preparation for the 19th National Congress taking place in Beijing in October. Fuel switching could restore some of the momentum given household electricity for heating is becoming more affordable.

Executive summary
Market
- Strong demand growth could herald winter supply tightness
- Power demand faces more downside pressure
Policy
- Provincial authorities explore intraprovincial pipeline tariff-setting mechanisms
- Lower tax and fee burden on renewables set to improve generation economics
- Pricing signals to kick-start coal-to-electricity switching in households
Corporate
- CNPC auctions piped gas via Shanghai Petroleum and Natural Gas Exchange (SHPGX)
- China Gas to support continuing coal-to-gas switching efforts in Shandong
- SPIC may divest its aluminium business to Chalco
Smog watch