Gas demand to develop at slower tempo
Add up to 21.5 mil mt/yr new LNG terminal capability in 2022
Price pressures to curb downstream demand, LNG spot volumes
China’s natural gas demand will proceed to rise in 2022, however the growth fee is anticipated to be slower than that in 2021, dampened by financial pressures and excessive spot LNG costs, analysts and market sources stated.
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“A weaker macroeconomic backdrop in China, with GDP forecast to decline from 8% in 2021 to 5.1% in 2022, alongside a close to file excessive spot LNG pricing atmosphere curbing some worth delicate industrial demand over Q1 2022, means Chinese whole natural gas demand is anticipated to develop at a slower fee in contrast to historic ranges,” Szehwei Yeo, LNG analyst at S&P Global Platts Analytics, stated.
National oil firm Sinopec expects Chinese natural gas demand to attain 395 Bcm in 2022, up 7% from an estimated 370 Bcm in 2021, in accordance to its analysis arm, Sinopec Economics & Development Research Institute. This growth fee will probably be slower than the 12.8% in 2021 and compares with demand of 328 Bcm in 2020, in accordance to the National Energy Administration knowledge.
China’s whole gas consumption was forecast to attain 430-450 Bcm in 2025, the NEA stated in its 2021 natural gas growth report. This implies demand will ease to single-digit share growth within the subsequent 4 years.
LNG import capability
China will bolster its place because the world’s largest LNG importer, and will add as a lot as 21.5 million mt/yr of LNG receiving capability in 2022, greater than the 14 million mt/yr added in 2021 and seven.85 million/yr in 2020.
This contains eight new LNG terminal initiatives and two enlargement initiatives, which can take China’s whole LNG receiving capability to over 127 million mt/yr in 2022 if all of the initiatives are on schedule, up from 105.8 million mt/yr at end-2021.
One of the biggest initiatives anticipated to begin in H2 2022 is Phase 1 of Suntien Green Energy’s Caofeidian LNG terminal within the northern Hebei province, which has a complete deliberate capability of 5 million mt/yr. In December, Suntien Green Energy signed a cope with Qatargas for 1 million mt/yr of LNG for 15 years.
Hong Kong- and Shanghai-listed Suntien is a Hebei provincial authorities managed natural gas distributor and wind energy producer, and its new terminal underscores the rising development of second-tier power corporations driving China’s future LNG imports.
However, like natural gas demand, China’s LNG import growth in 2022 could slow down as properly.
With sustained growth in home manufacturing and the continued ramp-up in pipeline imports from Russia by way of the Power of Siberia, room for LNG import growth in 2022 shrinks, Yeo stated.
China’s annual LNG imports are anticipated to improve by round 8 billion cu m in 2022, decrease than the 16 billion cu m anticipated for 2021 and the five-year common annual improve of 14 billion cu m, in accordance to Platts Analytics.
Price pressures
Yeo stated greater international gas costs are doubtless to proceed to weigh on Chinese downstream demand, at the least by way of Q1, and will proceed to hinder Chinese spot procurement in 2022.
“However, with contractual provide growing by an estimated 8.14 million mt/yr in 2022, excluding the Venture international offers, and 21 million mt/yr of recent regasification capability anticipated to come on-line, there stays momentum behind LNG import growth, even when spot publicity is falling,” she stated.
“Watch for continued curiosity from Chinese consumers in signing mid to long run SPAs/tenders listed to oil or [Henry Hub] provided that spot JKM costs are anticipated to stay elevated above oil listed ranges by way of 2022,” Yeo added.
“As such, developments in Europe will probably be vital in setting the spot worth of LNG in Asia, highlighting the built-in nature of at this time’s international gas markets,” she stated.
Meanwhile, market members stated excessive gas costs compelled many factories to shut down completely in 2021, and these personal enterprises have most probably switched industries, leading to demand destruction for natural gas.
“China’s LNG imports, particularly spot LNG imports is anticipated to cut back clearly in 2022 as importers would strive to keep away from massive losses brought on by import prices greater than home gross sales costs,” a Beijing-based supply stated.
The excessive gas costs imply that many smaller LNG corporations could not search LNG terminal slots from state infrastructure firm PipeChina in 2022, which may turn into problematic because the liberalization of China’s gas market and third-party entry to state LNG terminals had been an enormous indicator of gas demand.
Early market constitution indicated that many slots at PipeChina’s Tianjin LNG terminal haven’t discovered takers for 2022, a market supply stated, noting that almost all Chinese companies had been wanting to decrease spot procurement exercise, whereas maximizing long-term volumes with suppliers in 2022.
One elementary assist for Chinese gas demand in 2022 will probably be industrial customers in lots of provinces switching from coal to gas, and suppliers like Cheniere getting extra LNG cargo inquiries from energy technology corporations and even chemical corporations, as well as to metropolis gas and industrial customers.
State-owned PetroChina can even improve natural gas imports from Russia by way of the Power of Siberia pipeline to 43 million cu m/d in 2022, up 54% from 28 million cu m/day in 2021.