Gas demand growth slipping in China

(Platts; June 10) -China's 2020-2030 natural gas demand is expected to be 13 percent lower than previously forecast, which will lead to an oversupplied market and weaker prices, consultancy Wood Mackenzie said June 10. China’s demand is now expected to be about 12.7 trillion cubic feet in 2020 and 19.8 tcf in 2030, down from earlier forecasts of 14.9 tcf and 22.6 tcf, respectively, due to short-term and structural drivers, Wood Mac said. Even at the lower forecast, demand in 2030 would be three times more than 2014.

"Short-term drivers include low oil prices and high domestic gas prices, reversal of environmental policies, competition from coal and hydro and warmer winter weather," said Gavin Thompson, WoodMac's principal gas consultant. "Structural factors include the switch from industrial production to the service sector as a driver of economic growth." Despite weakening demand growth, Central Asian pipeline gas deliveries into China are continuing to rise, as are LNG imports.

"There is an oversupply of contracted LNG into the market, particularly during periods of low seasonal demand," Thompson said. Chinese oil and gas companies are pursuing numerous channels to reduce volumes, including efforts to renegotiate deliveries and pricing, and reselling cargoes into the Pacific market when it can reach agreements with suppliers, WoodMac said. China last year produced about 70 percent of the 6.5 tcf of gas that it consumed. It imported about 1.1 tcf of pipeline gas and almost 1 tcf as LNG.