China’s increasing liberalization of natural gas

Reforms on opening up the Chinese market play a prominent role in the country’s natural gas industry in 2015, which is the final year for the country’s 12th Five-year Plan (2011-2015). The Chinese government continues to push forward reforms by:

  • Unifying the prices of existing and incremental gas supplies for non-residential users
  • Granting exploration rights of upstream oil and gas blocks to non-state-owned enterprises
  • Opening up midstream gas pipelines
  • Setting up the Shanghai Petroleum & Natural Gas Exchange
  • Promoting reforms toward a mixed ownership structure at major state-run enterprises

On the upstream front, the country launched bidding on exploration rights for six oil and gas blocks in Xinjiang, with the option of separating gas transportation via pipeline and sales on the table on the midstream side and pilot opening up of prices for direct bulk gas supplies in the downstream sector.

Reforms along the whole industry chain of natural gas not only lay a foundation for the country’s efforts to liberalise its gas market but also generate new investment opportunities for private and foreign companies.

For the market of non-conventional natural gas, the interest of new investments has cooled down under the impact of reduced city-gate ceiling prices. Some foreign companies such as ConocoPhillips have withdrawn from the Chinese shale gas market. Only PetroChina and Sinopec are striving for more breakthroughs in shale gas development, while other enterprises hold a strong wait-and-see stance. The development of other non-conventional gas resources, such as coalbed methane and coal-based synthetic natural gas (SNG) is slow as a result of high financial input and stricter government approval on such projects under mounting pressure of environmental protection.

China’s apparent consumption growth of natural gas continued to slow down in 2015 as a result of declining economic benefits of clean energy due to higher costs and the country’s economic downturn. The country’s apparent gas consumption is estimated at 187.2 billion cubic metres in 2015, a rise of only 3.7% year on year. China’s domestic gas production is now determined by sales, switching from an output-based sales pattern.

For liquefied natural gas (LNG), China has seen prominent oversupply in the domestic market. Domestic LNG producers suffered from deepened negative margins, while margins of selling imported cargos were lucrative along with significantly decreased import costs. Widened negative margins at domestic LNG plants have resulted in lower premiums of such units in the merger and acquisition (M&A) market and thus spurred enterprise enthusiasm in low-cost acquisition. Many enterprises having other business focuses started to tap into the LNG market.

As one of the clean energy sources, natural gas use will still gain strong support from the Chinese government during the 13th five-year plan period (2016-2020).

What does it mean for international market players?

  • More overseas participants have been directly involved in gas trading and investments in China this year and this trend is expected to continue in 2016
  • The Chinese government is likely to have an increasingly open attitude towards international investments to create a more market-driven environment
  • There have been higher margins for spot cargoes; demand for long-term contracts is expected next year

In order to help you through your investment planning and business strategies, ICIS has updated its China natural gas annual report to give you a holistic view of the Chinese natural gas market. An essential resource for international sellers, the annual report covers all of the following:

  • China gas market supply and demand analysis for 2015 and forecast data until 2018
  • Chinese LNG overview – including production activity, prices and producers and terminal listings
  • Updates on government policies, hot topics and information on gas storage and logistics such as pipelines and storage tanks
  • Information on emerging non-conventional natural gas - shale gas, coal-based SNG market, coal-based methane market and coal liquefaction market

Enquire about the China Natural Gas Annual Report 

 

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China Natural Gas Annual Report

An in depth-review of China’s natural gas markets in 2015 with a detailed supply/demand outlook up to 2020, the newly updated annual study addresses all of the following questions:

  • How will China adjust its gas policies in the 13th five-year plan period (2016-2020) to spur rapid increases in gas consumption against the current backdrop of low oil prices and slower economic growth?
  • Non-terminal operators in China are allowed to import spot LNG cargoes into existing terminals via third-party rental agreement. What is the progress of such practices in 2015?
  • How to leverage on benefits brought on by Internet Plus initiatives?
  • How will China’s gas pricing reforms influence the market? What are the developments and trends in the current mechanism?
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China Gas Pricing Intelligence

Our weekly and monthly reports provide extensive information on China’s natural gas, LNG and non-conventional gas spot markets. The coverage of the reports include China’s domestic and import/export prices, local LNG plants’ schedules and operating rates, government policy updates, and supply-demand activities. Supported by analysis of key issues and price drivers, the reports are designed to help you keep up with developments in China, understand their impact on your business and have a reliable price benchmark when negotiating gas contracts.

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China LNG Supply/Demand & Investment Opportunities Report

This detailed report provides expert insights into the LNG demand outlook, broken down by province, in the context of domestic policies, infrastructure developments and other factors shaping investment opportunities in China. A valuable tool for industry participants seeking to take advantage of China’s LNG market liberalisation.

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LNG Global Pricing Data and News

ICIS delivers independent and highly regarded coverage for global LNG markets, ensuring you are able to strengthen your position in price negotiations and optimise profitability. Our daily and weekly reports include:

  • Spot assessments – 24 country-by-country DES assessments, 8 FOB prices
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  • Charter rates and availability
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