Gas Processing & LNG is Produced by Gulf Publishing Holdings LLC

China gas price surge likely short-lived as winter supply measures kick in

A recent surge in LNG prices in China is likely to be short lived, traders and analysts said, as state-run producers build up supplies to cope with winter chills and prevent a repeat of the 2017 crunch.

Wholesale prices of the super-chilled fuel almost doubled over three weeks in December as an early cold snap was accompanied by robust post-pandemic manufacturing activity and some provinces burning more gas as part of a national drive to shift away from coal.

The spike in wholesale delivered prices to a peak of more than 9,000 yuan ($1,376.36) per tonne at factories and LNG filling stations in northern China on Dec. 21, the highest in three years, was exacerbated by dealers hogging imported fuel.

"The price surge in December was totally not expected because dominant producers have prepared ample supplies of both piped gas and LNG, having also pumped in more gas into expanding underground storages," said Guo Jian, head of gas research with Sublime China Information.

Heating demand surged in northern regions, where gas is now a dominant heating fuel for more than 20 million homes, and several provinces in central and east China reported power surges and shortages.

soaring prices were a reminder of the winter of 2017, when China experienced a severe gas crunch that left factories shut and homes freezing as Beijing's aggressive anti-pollution drive to discard coal fueled demand for gas. Prices peaked at around 10,000 yuan that winter.

However, despite the early price surge this season, most analysts do not expect a repeat of 2017.

"Large dealers propped up prices after seeing city-gas firms scrambled to replenish stocks after the first cold spell, but that rush is over and prices are already correcting," said Li Ruipeng, a private dealer in north China's Tangshan who ships LNG in trailers to factories and gas filling stations.

Delivered wholesale prices have already eased back from the December highs to around 7,000 yuan per tonne this week.

Preparation began in advance of winter, with national producers ramping up domestic gas drilling and imports and Beijing allowing regions more flexibility on heating sources, including the use of electricity and coal.

Importers were expected to bring in a record of more than 9 MMt of LNG in December, putting China ahead of Japan as the world's top buyer for a second consecutive month.

As well as ramping up supplies of piped gas from Russia with volumes rising to 28.8 million cubic meters a day from Jan. 3, Chinese companies were accelerating drilling at domestic fields including shale gas in the Sichuan basin.

Also expected to take effect this winter was the launch of a new national company, PipeChina, late last year to take over the ownership and operation of oil and gas pipelines and storage facilities from state-owned energy giants PetroChina.

That reform of the infrastructure system was expected to both streamline supply and encourage more independent suppliers, helping to stabilize prices, SCI's Guo said.

"I am keeping a cool and analytical head, holding out for prices to come off further... while a few of my friends got badly burned buying at high," said Tangshan dealer Li.

Copyright © 2019. All market data is provided by Barchart Solutions. Futures: at least a 10 minute delay. Information is provided 'as is' and solely for informational purposes, not for trading purposes or advice. To see all exchange delays and terms of use, please see disclaimer.

                                  CMEGroup                                     Icelogo


Editorial Comment
-Adrienne Blume
The IEA’s “Global Gas Security Review2020” report, released in October, projects that global gas demand will fall by 3%, or 120 Bm3, in 2020—the largest drop on record.
Industry Focus: COVID-19 stokes competition for Europe’s LNG market
-Eugene Gerden
The level of competition in the global LNG market is rising as major producers look to increase their shares in a market severely weakened by the COVID-19 pandemic.
Regional Focus: Mega-project in the FSU: Ongoing development of the Shah Deniz gas field
-Gordon Feller
Multiple billions of dollars have been invested to develop the Shah Deniz gas field.
Safety and Sustainability: A new standard of safety for onshore passive fire protection
-Richard Holliday
The onshore energy and petrochemicals sector is defined by the strength of its safety culture, but it has only recently begun moving toward adoption of the highest fire protection standards.

GasPro 2.0: A Webcast Symposium

View On-Demand

Following the successful GasPro Webcast Symposium in October 2019, the third GasPro Webcast Symposium will take place on October 21, 2020.

The 2019 webcast drew attendees from around the world, with more than 80% of the audience working in company management or engineering divisions.

The 2020 web event will gather experts in the fields of LNG, gas processing and process safety to share market, operations and engineering technology and trends with our audience.

Attendees of the 2020 webcast will learn about market solutions and technology deployments in a number of areas: LNG delivery infrastructure, small-scale desulfurization for NGL, H2S removal for gas treating, process safety for safety instrumented systems, small-scale LNG project design, and advances in freeze component removal for LNG.

October 21, 2020 08:30 AM CDT

View On-Demand


Please read our Term and Conditions, Cookies Policy, and Privacy Policy before using the site. All material subject to strictly enforced copyright laws.
© 2021 Gulf Publishing Holdings LLC.