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High LNG Prices to Drag on Chinese Gas Consumption, Imports

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China is to have a very low growth rate of apparent natural gas consumption this year, due to weak domestic demand and high international spot LNG prices, according to a natural gas report released by the central government late last Friday.  

China’s apparent gas consumption in 2022 will be 375 billion cubic meters to 380 Bcm, increasing 1%-3% year on year, according to the China Natural Gas Development Report, which is jointly released by the National Energy Administration, the State Council and the Ministry of Natural Resources.  

China’s apparent gas consumption in 2021 was 369 Bcm, with an annual growth rate of 12.5%.  

However, market players claim that even the report’s low prediction might be too optimistic.  

“It is very possible to have consumption decline this year,” said a CNOOC LNG trader.  

LNG Imports Decline  

“Gas imports this year will slightly decline, and LNG imports probably will show the first decline in recent years,” said the report.  

The country’s LNG imports have been falling for seven consecutive months this year. China’s Covid-19-zero policy, slowing economic growth and high LNG prices have led to a deceleration in the country’s LNG import growth. Last year, China became the world’s No.1 LNG market, but it is expected to lose this status to Japan this year.  

Chinese buyers have largely stayed away from the spot market as Asian prices passed the $50 per million Btu level last week. Some Chinese importers have secured LNG supply through long-term contracts and resold their contracted volumes to take advantage of high spot prices for profit maximization.  

Domestic Gas Output to Continue Increasing  

China’s domestic gas production will continue an increasing trend this year, as it is Chinese President Xi Jinping’s direct order to increase domestic output for national energy security.  

In 2022, it is estimated that the domestic production will be more than 220 Bcm, aiming to increase by 10 Bcm annually.  

In 2021, China’s natural gas output was 207.6 Bcm, a year-on-year increase of 7.8% and an increase of more than 10 Bcm for five consecutive years, according to the report.  

Expensive international LNG prices pushed China to reduce LNG imports and increase pipeline gas imports and domestic production. The trend will continue if international oil and gas prices remain high for the rest of this year.  

Gas Demand

Gas demand for the rest of this year will be affected by the upcoming heating season from November to March, and by drastic price fluctuations in the global energy market, said the report.  

By sectors, city gas consumption will grow steadily, with residential and heating gas being the main driving force.  

The growth of gas power generation will slow down, mainly due to the slowdown in the growth of electricity consumption, the high base of last year and the relatively fast growth of power generation from renewable power.  

Growth of industrial gas consumption will slow down, mainly due to the high price of spot LNG imports.

Chemical and fertilizer gas consumption will remain stable, said the report.

China’s natural gas consumption as a slice of total energy consumption increased to 8.9% in 2021.

China's Gas Demand
(Bcm)20222021
Apparent Consumption 375-380369
Domestic Production220208
ImportsNA168
China's Gas Consumption Mix in 2021
City Gas32%
Industrial Users 40
Electricity Generation18
Chemical Users10
Total 100%

Topics:
LNG Demand, Gas Demand, Gas Supply
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