China natural gas demand to grow by over 80% by 2030: Sinopec
State-owned Sinopec expects China’s natural gas demand to increase by 82% to 510 Bcm in 2030, from 280 Bcm in 2018, driven by continued industrial upgrading and urbanization.
Gas demand growth will come mainly from city gas, industrial usage and gas-powered utilities. Demand is expected to exceed 300 Bcm in 2019, up by almost 10% year on year.
“City gas still has a lot of space for development in China,” a company official at an LNG conference in Beijing last week said.
City gas demand is likely to experience rapid growth over the next 10-15 years, driven by consumption growth from heating and the public sector.
This growth will be supported by China’s growing urbanization and urban gasification, which are expected to exceed 70% within the next decade, up from 59.7% and 50.9% at the end of 2018, respectively.
China’s city gas demand was 92.5 Bcm in 2018, accounting for a third of the country’s total natural gas demand, Sinopec’s data showed.
INDUSTRIAL DEMAND KEY
Demand from the industrial sector will be the key driver of China’s natural gas demand, driven by environmental policies and the expansion of industrialization.
“Industrial gas will be the backbone supporting the growth of natural gas consumption,” the official noted. “We expect gas demand from China’s inland regions to grow more in the future with industrial transfer,” the official said.
China’s gas consumption from the industrial sector was around 110.6 Bcm in 2018, up 19.2 Bcm year on year, accounting for nearly 40% of total gas consumption in the country, Sinopec data said.
Gas demand from the power sector will also rise in the future as new gas power plants are expected to start up in coastal provinces in the coming years.
SLOWER POWER GROWTH
However, growth from the power sector will slow down, on subsidy cuts and low margins, according to Sinopec.
China has further reduced its electricity price by 10% for industrial and commercial users in a bid to support the economy this year. Meanwhile, LNG import costs were raised by 10% year on year to an average of Yuan 3,024/mt in the first eight months of 2019, data from the Chinese customs showed.
Despite historically low LNG spot prices, Chinese and other Asian buyers still import most of their LNG through long-term contracts linked to other fuels such as oil, which generally yields higher prices than the current spot price for LNG.
“Until buyers either renegotiate these contracts or wait for them to unwind, it will be difficult for LNG to compete with other fuels, especially in the power markets,” according to Jeff Moore, S&P Global Platts’ Asia LNG Analytics manager.
China currently has more than 50 million mt of LNG supplies tied to long-term contracts, with only 5% set to expire in the next five years, according to Platts Analytics.
“Many natural gas power plants are now generating electricity at a loss, and some of them have suspended operations because of negative margins,” a market source in Guangzhou said.
China’s gas consumption from power generation was around 48.4 Bcm in 2018, accounting for around 17% of total gas consumption in the country, Sinopec’s data showed.