Natural gas supply set to satisfy needs in key season

A natural gas supply crunch is unlikely to happen nationwide in the 2019-20 heating season, due to a slower increase in natural gas consumption, and strengthened supply capabilities arising from continuous domestic production growth, increased imports, and improved gas infrastructure, industry insiders said.

The country’s annual natural gas output is expected to reach more than 170 billion cubic meters this year, increasing by more than 11 billion cubic meters, while it is putting more overseas natural gas in pipelines, Xinhua News Agency reported on Tuesday, citing an unidentified official of the National Development and Reform Commission.

The China-Russia east-route natural gas pipeline project is expected to start operation in early December, and imports of overseas liquefied natural gas have seen rapid growth.

The official also emphasized the availability of cross-regional energy connectivity infrastructure such as the south-to-north natural gas transmission project and one that boosts supply for the Beijing-Tianjin-Hebei region from northeastern China.

China is expected to build a gas storage capacity of about 20 billion cubic meters this year, and at present, the gas storage facilities of the top three oil and gas companies have completed gas injection as planned, to ensure gas supplies during the heating season, the official said.

Zhao Xu, an oil and gas expert with the School of Economics and Management at China University of Petroleum (Beijing), said the total gas supply from domestic output and overseas imports will be around 320 billion cubic meters in the year, slightly surpassing the estimated yearly demand of 311 billion cubic meters, if estimated on the basis of the supply and demand growth curves from January to August.

“It is highly possible that this winter will be relatively warm due to the El Nino phenomenon, and the switch from coal to gas for heating in northern China has been carried out smoothly without haste, which all help ensure the balance between gas supply and demand,” she said, adding that the gas crunch in 2017 was largely worsened by an unexpected sharp decrease in overseas supplies.

Xiong Wei, assistant director of the pipeline gas trading department at Shanghai Petroleum and Natural Gas Exchange, emphasized that the ongoing decrease in China’s gas consumption growth rate is likely to continue during the winter season, largely due to the slowed increase in industrial use.

From January to September, China consumed 216.6 billion cubic meters of gas, with a year-on-year growth of 10.1 percent, which was 7.4 percentage points less compared to last year.

On the contrary, China produced 126.3 billion cubic meters of gas in the first three quarters, increasing 10.9 percent year-on-year, which marked a milestone in that domestic gas output growth outstripped domestic gas consumption growth for the first time.

“Year-on-year as consumption growth rate this winter will be no more than 10 percent, and considering PetroChina’s natural gas output this winter is likely to outpace that of last year, while gas supplies to northern regions from Sinopec and CNOOC for the heating season are expected to grow respectively by 1.18 billion and 1.5 billion cubic meters, the gas demand and supply is supposed to be balanced generally,” he said, adding that the currently much lower imported LNG prices also contribute to increased supplies.

However, he warned that despite the highly likely supply and demand balance on a national level, regional restraints cannot be totally ruled out, especially if unexpected extreme cold weather occurs.

Both Xiong and Zhao said an imbalance in China’s gas supply and demand is a long-term concern, as China lacks conventional natural gas resources.

They suggested more government incentives and financial support to be provided to develop unconventional natural gas resources.