China's LNG Demand Slows on Rising Gas Output, Pipeline Supplies
(Reuters) - China's rising natural gas output and pipeline supply are slowing its liquefied natural gas imports this year, capping prices in the region, but industry executives expect LNG demand from its industrial and power sectors to grow in the long run.
Imports to the world's top LNG importer fell to 20 million metric tons during the first four months of this year, down from nearly 29 million tons in the corresponding period last year, customs data showed, due to mild weather and buyer resistance to higher prices.
Chinese firms are also re-selling instead of importing U.S. cargoes after Beijing imposed a 15% import tariff in a trade war with Washington.
In the first quarter, China's domestic gas production rose 2.7 billion cubic meters (bcm) while pipeline gas imports increased 1.2 bcm, said Zhu Yanyan, general manager trading and commodities center at CNOOC Gas and Power Group.
Meanwhile, LNG imports fell 20% or 5.7 bcm, she added.
"Our domestic gas and pipeline gas are covering the loss of LNG, because LNG is quite expensive," she told delegates at the World Gas Conference.
Consultancy SIA Energy's CEO Li Yao expects China's gas output and piped gas imports to rise by 13-15 bcm and 8 bcm, respectively, this year.
"Domestic and imported pipeline gas can probably more than offset the declining LNG imports and the demand slowdown caused by the ongoing trade war," she said.
"Chinese LNG demand has struggled so far this year with mild weather and economic uncertainty, but the expectation is for a recovery driven by lower prices, economic stimulus, and more stable relations with the U.S.," Mercuria's Executive Vice President Gas & LNG Steve Hill said.
Demand Drive
In the long run, Chinese firms forecast gas demand will continue to grow in the next decade, requiring more LNG imports.
The president of China Oil and Gas Pipeline Network Corp, or PipeChina, expects gas demand to reach 650-700 bcm by 2030-2035, while the chairman of Sinopec Corp forecasts gas demand peaking at about 620 bcm between 2035 and 2040.
State-owned China National Petroleum Corp (CNPC) and Sinopec expect China's natural gas consumption to rise about 6% this year to 448.5 bcm and 458 bcm respectively.
ENN Natural Gas, one of China's largest private gas distributors, expects gas demand to reach 550-600 bcm by 2030.
"Although growth is slowing down, the long-term trend remains upward, even in the 2030-2060 period," ENN's Vice President Su Li told reporters.
ENN aims to expand its long-term LNG supply portfolio to meet growing domestic sales and supply overseas markets, she added.
"Industry continues to be a key vector forward rather than power, and also more and more the transport market, in particular heavy transport," said Shell's president for integrated gas, Cederic Cremers, referring to the conversion of diesel trucks to LNG in China.
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