Commodity Market Report

China gas markets long-term outlook H1 2019

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22 August 2019

China gas markets long-term outlook H1 2019

Report summary

2018 saw China build on the coal-to-gas switching momentum of 2017 and it continued to increase gas demand at a fast pace. Gas demand grew by 17% year-on-year, or up by 41 bcm. China managed to avoid gas shortages in winter 2018/19. However, China’s gas demand has faced multiple headwinds in 2019. Current policies lean towards preventing a deeper slowdown of the economy while the pace of gas demand creation has moderated. In this update, we’ve adjusted down China’s gas demand compared with our H2 2018 outlook, primarily due to the government’s more cautious approach towards fuel choices and the downgraded GDP forecast. We have also downgraded the domestic supply outlook as unconventional resources face more challenges, which provokes a greater need for LNG imports in the long term.

Table of contents

  • Introduction
  • Structure of gas demand gradually changing with increasing seasonality
  • Gas production ramps up faster near term, underpinned by conventional sources; long-term potential hinges on unconventional sources
  • LNG imports will break 100 mmtpa by the early 2030s, despite more pipeline imports
  • Reforms will reshuffle the industrial landscape
  • Non-NOCs will increase their presence, slowly
  • Will China exert greater influence on global LNG pricing?
  • Key data tables
    • Midstream reform is gaining momentum
    • Midstream-related regulations are being updated to pave way for third-party access
    • Local governments streamline end-user gas prices
    • China still reviewing its fuel-switching policies
    • China raises US LNG import tariffs to 25%
  • Regulatory structure
  • Gas demand overview
  • Industrial sector (including feedstock)
  • Residential and commercial sector (including winter space heating)
  • Transport sector
  • Power sector
  • Domestic conventional supply
  • Unconventional supply: tight gas
  • Unconventional supply: CBM and CMM
  • Unconventional supply: synthetic natural gas (coal-to-gas)
  • Unconventional supply: shale gas
  • Supply cost stack
    • Central Asia imports
    • Turkmenistan
    • Uzbekistan
    • Kazakhstan
    • Myanmar imports
    • Russian imports
    • Russia East
    • Russia West
    • Russia Far East
  • Assumed import pipeline contract pricing
  • Gas imports – LNG
    • Existing
    • Under development and proposed
  • Domestic gas infrastructure – underground storage facilities
    • CNOOC and its joint ventures
    • CNPC-PetroChina
    • Sinopec
    • Non-NOCs
  • Regulation overview
    • Trial stage (2011-2013)
    • Two-tier pricing stage (2013-2015)
    • Price adjustments and ending of cross-subsidisations for residential and fertiliser sectors (2015-present)
    • City-gate gas pricing in policy versus in reality
  • The role of trading platforms
    • Interprovincial transmission pipeline tariffs
    • Provincial transmission and local distribution tariffs
    • Power
    • Industrial and commercial
    • Residential
    • Transport
  • Value-added tax on natural gas
  • Appendix – end-user prices in provincial capital cities

Tables and charts

This report includes 43 images and tables including:

  • China gas demand by sector
  • China gas demand by province
  • China gas market balance
  • Supply changes vs H2 2018 outlook
  • China power market balance
  • Economic indicators
  • China energy policy making and regulatory structure
  • Total China gas demand by sector
  • Total China gas demand by province
  • Industrial fuel Gas Demand by Provinces
  • Fertilisers and Chemicals gas demand by top province
  • Residential/commercial gas demand by province
  • Winter heating gas demand by province
  • Transport gas demand by provinces
  • Transport gas demand by vehicle types
  • Gas demand in power generation by region
  • Power generation mix
  • Domestic gas supply by basin
  • China conventional/unconventional supply
  • Domestic gas supply by basin (%)
  • 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
  • Assumed Turkmenistan contract price into Shanghai (2019 terms)
  • Assumed Russian contract price into Beijing (2019 terms)
  • China contracted LNG by project and buyer (SPAs and HOAs)
  • Contracted LNG by import company
  • Contracted LNG by exporting country
  • China underground gas storage map
  • LNG receiving capacity outlook to 2025, as of August 2019 (mmtpa)
  • SHPGX and CQPGX transaction volumes
  • Key facts
  • Key changes to analysis from H2 2018 publication
  • Summary of13th five year plan energy targets
  • Trans-Asia gas pipeline route map
  • Russia-China gas pipeline route map
  • Key domestic gas infrastructure - existing
  • China LNG terminals map
  • China Supply and Demand Balance
  • LNG Demand (Contracted vs Uncontracted)
  • Tariff rate by individual pipeline company, effective as of April 2019
  • Tariffs of major pipeline routes, effective as of April 2019
  • End-user prices vs. competing fuel (as of July 2019)

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