2018 Q4 West China LNG Market Review

2018 Q4 West China LNG Market Review

According to SCI, the LNG output from seven provinces in West China (including Shaanxi, Inner Mongolia, Ningxia, Xinjiang, Gansu, Qinghai and Tibet) was 0.22 mn mt. The total output from Shaanxi and Inner Mongolia was 0.16 mn mt, making these two provinces the major LNG suppliers in West China.

Supply

The feedstock suppliers (mainly NOCs’ branches and subsidiaries) started to restrict the piped gas supply to LNG plants in West China, reducing the LNG plants’ operating rate greatly.

West China LNG Plant Turnarounds Statistics

Up to now, there’re 6 LNG plants in West China newly closed for turnarounds in 2018, involving a total capacity of 3.3 mn cbm/d. These 6 plants are still in the turnarounds and have no plant to restart soon.

Price

According to SCI, the average LNG dealing prices in West China’s seven provinces in Q4, 2018 were obviously lower than those in 2017. This was mainly because that the gas supply in the 2017-2018 heating season was extremely tight, pushing up China’s LNG prices greatly. The radical coal-to-gas reform in 2017 winter caused an unexpectedly high gas demand. Thus, NOCs started to work for 2018-2019 heating season since April 2018. And they are well prepared now.

Shaanxi: The average LNG price in Q4, 2018 was RMB 4,568/mt, down RMB 1,098/mt Y-O-Y. Entering Q4, 2018, the LNG price showed an unnatural trend. The average LNG prices in Shaanxi hovered at RMB 4,100-4,200/mt. With the sudden temperature decrease in early December, the gas consumption in residential sector jumped, and NOCs started to limit the piped gas supply to LNG plants. The average LNG dealing price in Shaanxi rebounded to RMB 5,500/mt, and then decreased slightly due to end users’ resistance to high offers. The temperature decreased again in late December, so the LNG price increased slightly again. Besides, the piped gas offers to LNG plants increased by RMB 0.2/cbm to RMB 2.58/cbm. Increasing feedstock cost will force the LNG price in Shaanxi to continue rising. The feedstock cost is estimated to increase by RMB 200/mt. As the Chinese New Year is approaching, the operating loads and fuel consumption at downstream industrial enterprises will decrease, resulting in balanced supply-demand pattern. On the long term, SCI predicts that the LNG price will drop.

Inner Mongolia: The average LNG price in Q4, 2018 was RMB 4,493/mt, down RMB 967/mt Y-O-Y. The LNG dealing prices in Inner Mongolia hovered at RMB 4,200-4,400/mt due to the decreasing prices in surrounding regions and slumping demand. The feedstock limitation in Inner Mongolia was more restricted, lifting the price. However, downstream users showed resistance, and the LNG price dropped back to RMB 4,900/mt. The LNG price will continue to increase due to the increasing demand caused by the decreasing temperature.

Ningxia: The average LNG price in Q4, 2018 was RMB 4,515/mt, down RMB 792/mt Y-O-Y. The price trend in Ningxia was quite similar to that in Shaanxi due to the close distance between the two provinces. There won’t be plants close or restart in a short term, and SCI predicts that the LNG price in Ningxia will be stable-to-increasing.

Xinjiang: The average LNG price in Q4, 2018 was RMB 4,053/mt, down RMB 81/mt Y-O-Y. The average dealing price in Xinjiang kept largely stable in October and November, and rose due to the increasing feedstock price in December. SCI predicts that the LNG price in Xinjiang will be stable-to-increasing.

Gansu: The average LNG price in Q4, 2018 was RMB 4,550/mt, up RMB 154/mt Y-O-Y. Gansu’s gas demand is relatively small, and the LNG price here is mainly affected by the supply-demand situation in Ningxia and Xinjiang. Data showed that there’re no operating LNG plants in Gansu in Q4, and these plants had no plans to restart soon.

Qinghai: There’s only one LNG plant in Qinghai Province, the Kunlun Energy (Qinghai) – Golmud Plant. Its products are mainly provided to customers in Tibet at a largely stable price.

Forecast

The capacity growth in West China will continue to slow down in 2019, and the supply will not change obviously. Promoted by the coal-to-gas reform, the gas demand may inch up in 2019.

SCI predicts that the average LNG ex-works prices in West China’s seven provinces in 2019 will be around RMB 3,700-4,500/mt, lower than those in 2018. The annual average price may be below RMB 4,100/mt. The growth of China’s LNG demand will slow down, and the demand in some regions may even decrease. However, the receiving capacity at terminals and the import volume may continue to increase. Regulated by the policies, the LNG price spread in the peak season and the slack season will continue to narrow, and the market will show a flatter trend.

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