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Chinese gas demand exceeded expectations to grow 14.9% in the
first half of 2021, ahead of the 7.6% growth in 2020. LNG imports
were the biggest contributor—almost half of the incremental
supply year on year—to meet demand growth so far this year.
With the quickly aproaching heating season, which typically begins
in mid-November, the question is, will China rely heavily on the
spot market to meet gas demand this winter?
From a demand perspective, growth moderation is expected in the
coming months. The high demand growth in the first half of the year
was the result of winter conditions, a strong economic growth
rebound, the continued coal-to-gas campaign, and robust power
demand growth at the time of limited power generation from hydro
and coal. The latter three factors are showing signs of
decelerating gas demand. Support for gas demand may come from a
short-term clean air push for "blue sky" during the Beijing 2022
Winter Olympics in February, although the effect will be limited to
the neighborhood region and could partially be offset by safety
measures.
Total supply in general and flexible supply in particular will
improve this winter compared with the last winter season. Supply
increase will mainly come from domestic gas production and Power of
Siberia gas imports. In terms of flexible supply, storage capacity,
gas available from storage, and the withdrawal rate will also
improve year on year. Compared with the beginning of the last
heating season, storage capacity at LNG-receiving terminals and
underground storage working capacity will rise 17% and 12%,
respectively. Gas injection plans indicate that gas available for
withdrawal ahead of the 2021/22 winter will be 1-2 Bcm higher. In
addition, the daily send-out capacity from LNG terminals and daily
extraction rate from underground storage will rise 10%, reaching
537 million cubic meters per day and 178 million cubic meters per
day, respectively.
Adding together the rising upstream production capacity, the
ramping up of Power of Siberia gas imports, and the withdrawal rate
from underground storage facilities and LNG receiving terminals,
peak supply can cover 38 Bcm per month and 1.4 Bcm per day, which
are our peak demand assumptions in normal weather conditions.
However, the share of storage capacity in total demand will be
flat year on year at 6.4%, making tight supply a distinct
possibility in a colder-than-average winter. Without any
supply-side factors, a "1-in-5 year" colder winter will likely add
about 2 Bcm to the monthly demand, equivalent to 1.4 million metric
tons (MMt) of LNG. In a "1 in 20 years" cold winter, the additional
demand from the base case will be 2.4 MMt of LNG. However, the
currently high spot LNG prices are certainly a challenge for
Chinese importers to make a profit. In addition, new policies on
supply security post-midstream reform also reduce suppliers'
willingness to import LNG at a loss. As a result, supply
curtailment will continue to be the tool of last resort in a tight
supply winter.
Since 2021 it has been observed a strong reduction of stacked OSVs. The increasing demand has encouraged companies… https://t.co/TcqJsN4JMp
Jul 05
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