Is China Facing A Gas Shortage?

The major Chinese oil and gas companies are boosting natural gas supply across the country ahead of the winter heating season, as demand in China continues to grow, although at a slower pace than in previous years.

According to China’s news agency Xinhua, Sinopec and CNOOC will be increasing this winter’s gas supply compared to the volumes they provided in the previous heating season, while China National Petroleum Corporation (CNPC) will boost natural gas production from major gas fields in the country.  

Sinopec is set to boost its natural gas supply for north China by 15.5 percent to 8.81 billion cubic meters (bcm), while CNOOC will raise its gas supply by 1.5 bcm from last season, to 24.5 bcm.

China is stepping up its coal-to-switch campaign to fight pollution, although it has now adopted a more measured approach to the switching in order to avoid gas shortages and soaring liquefied natural gas (LNG) prices.

Gas demand in China continues to rise, but at a weaker rate than in the past few years, due to slowing economic growth. Chinese government estimates show that Chinese natural gas consumption is set to grow by 10 percent this year, compared to 17.5-percent growth last year.  

Related: The End Of The Asian Oil Product Glut

Currently, China is not expected to see significant shortages in its winter gas supply, and Asian LNG spot prices are unlikely to shoot up as much as they did two years ago.

Last week, Asian LNG spot prices rose to an eight-month high with winter demand in the region already emerging, but LNG supply is enough to meet demand and will likely keep a lid on prices, traders told Reuters.

Buyers across Asia have mostly secured their winter LNG purchases, while supply from Australia, Russia, and the U.S. continues to rise, so the recent rally in LNG prices could soon come to an end, traders told Bloomberg this week.

By Tsvetana Paraskova for Oilprice.com

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