China's sputtering economy crimps gas demand, cuts spot LNG buys
BEIJING, Sept 15 (Reuters) - China's gas demand growth is expected to ease to its slowest in three years in 2014 and dip again next year, as a slowing economy and an ill-timed hike in prices keep gas demand at levels well below bullish forecasts.
The slowdown indicates demand will struggle to meet levels forecast by the International Energy Agency, which said in June that China is entering a golden age of gas, and could make life hard for new gas projects hoping for spot sales to China.
PetroChina , one of the country's two top gas importers, has cut shipments of spot liquefied natural gas (LNG), an industry source said, and sees demand growth under pressure for at least three years.true
China accounted for half of the world's additional gas usage last year and the scaling back of spot LNG purchases comes as at least four Australian LNG projects are due to start operations in 2014 and 2015.
"If we don't need to import, we won't. As long as our LNG terminals have enough feedstock, we won't need much spot supply," said a source with direct knowledge of PetroChina's gas operations.
The IEA expects China's gas consumption to rise 90 percent within the next five years to reach 315 billion cubic metres (bcm) by 2019, offsetting slower growth in Europe and elsewhere. That would imply an annual growth rate of 17.5 percent.
However, China's top oil and natural gas producer, China National Petroleum Corp, sees apparent natural gas consumption climbing just 9.5 percent, down 4.7 percentage points from 2013.
PetroChina's spokesman Mao Zefeng declined to comment on the firm's spot LNG business but he said at a conference last week that China's gas consumption growth would ease further in 2015.
"In the short term, the gas price reform and slowing economy will affect demand ... but we believe demand growth will be restored three to five years later," Mao said.
As demand in China slows, PetroChina has ample supplies due to additional cargoes that have started to arrive since late 2013 under a term supply deal with Qatargas, company sources said.
The firm has already shut two loss-making gas liquefaction plants and is also reviewing its multi-billion-dollar push to produce LNG to fuel trucks and ships in China.
Traditional energy sources, crude oil and coal, have already fallen victims to China's slowing economy, with diesel set to post its first fall in more than a decade this year and steam coal prices tumbling to a six-year low.
Although gas demand has been bolstered by China's pledge to clean up its smoggy skies, higher local production, long-term LNG purchases and more pipeline imports means supply growth has outpaced consumption at a faster rate than last year.
Total gas supplies to China, including imports and domestic production, rose 9.6 percent in the first half of this year to reach 91.5 bcm. That compares with an apparent consumption growth of 8.9 percent, data from top planning agency National Development and Reform Commission (NDRC) shows.
Based on that annualised growth rate of 8.9 percent, total demand would reach 184.2 bcm at the end of 2014.
A series of gas price hikes, totalling 33 percent since mid-2013 as part of Beijing's long-term market reform, have also posed as a double whammy for industrial users.
"Ultimately higher prices are going to impact demand," said Neil Beveridge, an analyst with Sanford C. Bernstein & Co.
"They can't have high demand growth with international energy prices." (Editing by Fayen Wong and Richard Pullin)
- Published on:
- September 15, 2014
- Source url: