Quantcast
Channel: Natural Gas Power Generation, Combined Cycle Gas Turbine Generation | Gas to Power Journal UK - Gas To Power Journal - Gas To Power Journal
Viewing all articles
Browse latest Browse all 1190

Uncertainty over China’s gas demand growth impacts rival suppliers

$
0
0
All eyes are on China’s health crisis and its impact on economic and energy demand growth. Though a U.S.-China trade…

With the U.S. election looming large in November, analysts say it is unlikely that President Trump will facilitate real breakthroughs on trade with China. Russia’s Gazprom might turn out to be the ‘laughing third’ as it strives to ramp up deliveries to China through the new 38 Bcm/y Power of Siberia pipeline.

Beijing strives to diversify China’s gas sources, but the cost of any new supply option matters. Considering the huge expenses of transporting Russian pipeline gas over thousands of miles towards Beijing and Shanghai, analyst deem it “unlikely” that CNPC will want to quickly ramp up gas supply from Siberia at the expense of imported LNG.

Eventually some 8 Bcm/y of Russian gas will be exported to China’s CNPC through the new interconnector, but the competitiveness of PoS gas imports in China is entirely dependent on where it is sold.

Costs hinge on point of sale

Considering the cost of PoS gas into the Yangtze River Delta versus recent LNG contracts, Wood Mackenzie says this is “not a major competitive threat.” Particularly because the Yangtze River Delta is a region that already has six regas terminals, with a further three greenfield projects under construction and two more proposed.

Things look different further north. “In the Northeast, tariffs from the Russian border will only be around $1/MMBtu to reach a city such as Shenyang, making ‘Power of Siberia’ gas attractive against LNG,” Mr. Thompson said. “But to take gas further south to Shanghai will increase tariffs to around $3/MMBtu.”

“LNG doesn’t have this problem. And the world is awash with dirt cheap LNG right now,” he added, suggesting “this will continue over the next couple of years as more projects come onstream.” Moreover, China is rapidly expanding regas capacity and pushing third-party access policies to encourage more participants.

While legacy LNG contracts are the marginal source of supply into China, recent LNG contracting trends are seeing term deals signed around 11% of oil, Wood Mackenzie understands. At this level of oil indexation, new LNG projects would not really have fear Russian pipeline gas into China.

Uncertainty on PoS gas price, future tariffs

Wood Mackenzie’s team of China gas analysts hence argue that the ‘Power of Siberia’ pipeline will take 7 to 9 years to reach full capacity. Analysts in the West, however, have only limited understanding of exactly how the Power of Siberia gas contract is priced and what future pipeline tariffs will be following the establishment of China’s new national pipeline company in early December.

“China’s recent proposals to exclude city-gate prices from national regulations, mean Russian gas prices will be deregulated, potentially encouraging PetroChina to raise wholesale prices (which would also benefit LNG),” Mr. Thompson said. “But what we do know for sure is that even with Russian pipeline gas now in China, LNG is increasingly competitive into China and should continue to play a key role in supplying cleaner energy into this most critical of markets.”


Viewing all articles
Browse latest Browse all 1190

Trending Articles