Chinas natural gas market will continue to balance this year

In 2021, China will become the world's first large LNG importer with the overall natural gas market showing a trend of " weak in off-season but weak in peak season". It is expected that in 2022, China's natural gas market demand will grow steadily but the growth rate will slow down, the overall market will continue to maintain tight supply balance.

In 2021, the increase of natural gas consumption in China exceeded the historical extreme value. Annual apparent consumption was 372.6 billion cubic meters, up 42 billion cubic meters year on year exceeding the record growth of 41.7 billion cubic meters in 2018. Domestic natural gas production reached 208.5 billion cubic meters, an increase of 12.6 billion cubic meters 6.4 percent. It imported 169.1 billion cubic meters of resources, accounting for 44.0% of the country's external dependence. Of this, pipeline gas imports totaled 59.1 billion cubic meters, accounting for 35%; LNG imports amounted to 110 billion cubic meters, 65%, overtaking Japan to become the world's largest LNG importer. LNG purchasing sales chief agreement set a new record. In 2021, the spot price of LNG was high, suppliers such as Sinopec CNOOC actively sought the resources of LNG association in pursuit of long-term stable resource supply. In the whole year, 14 importers signed 20 LNG purchase contracts with Qatar Petroleum, Chenier of the United States Novatek of Russia, which exceeded the total number of contracts in the past seven years.

In 2022, China's natural gas market will present the following characteristics:

Market demand maintains rapid growth but the growth rate is slowing down. Driven by economic support, dual control of energy consumption, environmental protection supervision improvement of production, supply, storage marketing capacity, the overall market demand for natural gas still maintains a rapid growth. At the same time, the spread of COVID-19, the resumption of export orders in the global supply chain, the shortage of new gas electricity installations, the shortage of international resources, the continued high prices, the impact of alternative energy have also restrained consumption growth. Overall, China's total demand for natural gas in 2022 will be about 407 billion cubic meters, the new demand will be about 35 billion cubic meters, with a year-on-year growth of about 9%, lower than the 12.7% growth in 2021. The growth mainly comes industrial fuels power generation. The overall growth rate in the four quarters will be low before then high.

Resource supply is steadily increasing but seasonal contradictions are still unavoidable. Major oil companies continue to push forward the seven-year action plan for exploration development, it is estimated that domestic gas production will increase by 13 billion to 14 billion cubic meters in 2022. The annual supply of resources totals 405 billion to 408 billion cubic meters, basically balancing the annual supply demand. However, the LNG receiving stations planned to be put into operation within this year, such as North Combustion Tianjin, Xintian Tangshan, Cnooc Binhai Zhangzhou, will basically be put into operation after October even at the end of the year, so it is difficult to form an effective receiving capacity before the heating season. At the same time, the construction of gas storage is relatively lagging behind, the daily insurance supply capacity in peak months, especially in high months, will still be insufficient. In some parts of the region, pressure will continue to be exerted, demand-side adjustment measures need to be taken.

In 2021, economic recovery will be driven by the easing of the global epidemic, carbon neutrality will increase, leading to rapid growth in natural gas demand. Major changes have taken place in the global natural gas market. Supply demand have broken through cyclical laws, gas prices in the three major markets have risen sharply to record highs. In the context of the imbalance between supply demand in the global natural gas market the short term supply shortage will continue, China's natural gas industry should start the following aspects to do a good job in the relevant security work.

First, we will continue to strengthen China's capacity for production reserves. In the face of rising year by year, external dependency must absorb the gas supply security in the power game against lessons, at the same time the past two years at home abroad market situation of supply demand price for reflection inversion, unswervingly promote domestic upstream gas field on the basis of production, increase the intensity of high quality production release, the gas side jobs as much as possible into his own hands, At the same time, we will continue to strengthen our reserve capacity, strengthen the responsibility of all parties to ensure supply, lay a solid foundation for the steady supply of resources.

Second, guide resource procurement downstream sales to sign medium - long-term purchase sales contracts. In 2021, China will import about one-third of LNG spot resources, which brings huge cost burden to resource importers downstream users, brings great pressure to production operation coordination. It is suggested that the state should coordinate resources market promote major resource suppliers to sign medium - long-term overseas resource procurement contracts based on the long-term perspective. We will guide domestic upstream downstream sectors to sign medium - long-term purchase sales contracts, encourage the use of flexible pricing formulas linked to benchmark prices such as international oil gas prices. Take advantage of the LNG resources of the Long association to guarantee the domestic market demand first, seek international resale on the premise of surplus; We should promote cooperation among enterprises, get out of the prisoner's dilemma, jointly strive for a greater say in the international market.

Third, we will improve the fairness openness of receiving stations pipe network facilities. The fair opening of natural gas pipe network facilities should adhere to the dual goal orientation of supply protection opening, take supply protection as the core task, follow the principles of priority of supply protection in heating season, balance in off-season peak season, long-term resource cooperation, do encourage separate application for off-season window. It is suggested to strengthen industry supervision, clarify the guarantee responsibility of new entrants, build a market environment of fair competition survival of the fittest. Strengthen the supervision of purchasing sales contracts, pipe capacity LNG receiving station's performance during the window period, establish a normal credit management mechanism; Strengthen the monitoring early warning of natural gas supply safety, improve the monitoring capacity of production operation market demand; We should strengthen market guidance stabilize the scale pace of spot LNG procurement under the principle of relatively loose resource supply.

Fourth, seize the lead, expand the market, promote growth, plan the long-term development strategy of the industry. First of all, the national "double carbon" strategy should be implemented to continuously improve the gasification level of natural gas in flat glass, sanitary ceramics, building materials, iron steel metallurgy other industries, as well as other key areas of air pollution prevention control of fuel furnace (kiln). Secondly, seize the opportunity of accelerating the construction of a unified power market system nationwide, promote the construction of a number of natural gas new energy integration projects with gas electricity peak frequency modulation as backup power sources as the starting point. We will accelerate the construction of natural gas futures market system, form a national natural gas market trading environment that is open to competition, standardized orderly.

Zhou Shuhui shen Xin (The author is Zhou Shuhui, chief technical expert Shen Xin, director of natural Gas Market Research Office of Petrochina Planning Institute)

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Source: China Petroleum News

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