Commodity Market Report

China gas markets long-term outlook H1 2018

27 July 2018

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27 July 2018

China gas markets long-term outlook H1 2018

Report summary

2017 saw China demonstrate the power of policy and marked great success in demand creation. Gas demand grew by 32 bcm, or 15% year-on-year. The increased use of gas has proved beneficial to air quality improvement. As China continues to look at clean energy including natural gas to achieve its long-term goal of improving living standards in the country, gas demand has bright growth prospects. Currently, gas accounts for 7% of China's total energy demand. We believe it will continue to gain share in the energy mix from that low base. In this update, we've revised up demand in 2020-2035 compared with our H2 2017 outlook, and extended the outlook to 2040.

Executive summary
- Introduction
- Infrastructure development has become priority
- Gas pricing reform moving in the right direction
- Strong momentum in signing additional contracted LNG
- Downside risks remain to Central Asian gas imports
- Russian gas imports will be a stronger competitor against LNG in northern China
- Domestic conventional gas production outlook upgraded in the long term
- Unconventional gas development sees stronger momentum, yet challenges remain
- Key data tables
Economic outlook
Policy and regulation
- Gas sector policy and regulation
  - Pricing reform blueprint for gas and power
  - Winter Clean Heating Policy for Northern China
  - Annual guidance for energy sector development
  - NDRC merges residential and non-residential city-gate gas prices
- Regulatory structure
Demand
- Gas demand overview
- Industrial sector (including feedstock)
- Residential and commercial sector (including space heating)
- Transport sector
- Power sector
- Appendix - Provincial demand data
Supply
- Domestic conventional supply
- Unconventional supply: tight gas
- Unconventional supply: CBM and CMM
- Unconventional supply: synthetic natural gas (coal-to-gas)
- Unconventional supply: shale gas
- Appendix: Domestic supply
Costs
- Supply cost stack
Trade
- Gas imports - pipeline
  - Central Asia imports
    - Turkmenistan
    - Uzbekistan
    - Kazakhstan
  - Myanmar Imports
  - Russian imports
    - Russia East
    - Russia West
    - Russia Far East
Infrastructure
- Domestic gas infrastructure
  - Existing
  - Under development and proposed
- Domestic gas infrastructure - underground storage facilities
- Gas import infrastructure - LNG
  - CNOOC and its JVs
  - CNPC-PetroChina
  - Sinopec
  - Private entrants
    - China LNG terminal map
Supply-demand balances
- Contracted supply
- LNG supply-demand balance
Prices
- Introduction
  - City-gate gas pricing structure
  - The role of SHPGX in gas pricing
- Prices at end user level
  - Power
  - Industry and commercial
  - Residential
  - Transport
- Appendix - Provincial end user prices
Risks and uncertainties

Tables and charts

This report includes 36 images and tables including:

Economic Indicators
China Supply and Demand Balance
China gas demand by sector

Executive summary: Table 2
China gas market balance
China power market balance
China energy policy making and regulatory structure
Total China gas demand by sector
China demand by province
Industrial gas demand by province
Fertilisers and Chemicals gas demand by province
Residential/commercial gas demand by province
Demand: Image 6
Winter heating gas demand by province
Demand: Image 8
Demand: Image 9
Gas demand in power generation by region
Power generation mix
China supply outlook by region/basin
Supply: Image 2
China conventional/unconventional supply
Supply growth by region/basin
China supply cost by project – full life breakeven vs import contract price
China supply cost by basin - remaining breakeven plus tariff assumption to Shanghai
China underground gas storage map
LNG Receiving Capacity by Status and by Company, as of June 2018 (mmtpa)
LNG Demand (Contracted vs Uncontracted)
Additional key policy events in H1 2018
Summary of 13th five year plan energy targets
Infrastructure: Table 1
End-user prices vs. competing fuel (as of June 2018)
Trans-Asia gas pipeline route map
Trade: Table 1
Contracted LNG by import company
Contracted LNG by exporting country
Infrastructure: Image 3