China Natural Gas Import Reached Historical New Highs

According to CGAC, China imported 6.29 mn mt of LNG in December 2018, up 5.01% M-O-M and 25.08% Y-O-Y. Meanwhile, China imported 2.94 mn mt of LNG in December 2018, down 7.26% M-O-M but up 2.73% Y-O-Y. Thus, China imported 53.96 mn mt of LNG (up 40.92% Y-O-Y), 36.62 mn mt of PNG (up 20.34% Y-o-Y) and totally 90.58 mn mt of natural gas (up 31.81%).

The hasty coal-to-gas reform, insufficient preparation and sudden shutdown of the PNG import from Central Asia left rural residents trembling in their freezing houses in 2017. To avoid such embarrassing situation, China took multiple methods this time. On the one hand, the coal-to-gas reform slowed down. However, it is caused basically by the elusory Trump and the Sino-U.S. trade war. On the other hand, NOCs were driven to start the winter gas preparation since the 2018 spring. They did quite well to build huge stock via long-term contracts, storage facilities and marketization reform. For instance, the CNPC Tangshan Terminal received 11 ships of LNG in 25 days. Beijing’s determination on the promotion of clean energy shall not be questioned, and this determination shows great power when it is combined with a new economic superpower. In fact, the natural gas supply in this winter might be too sufficient (especially compared with the situation in 2017): According to sources from the methanol industry, the feedstock limitation to gas-based methanol plants are not as restricted as it was in 2017.

The whole country feels happy to this news, except the LNG dealers. Due to the extremely tight supply in the 2017-2018 heating season, China’s LNG price ran at high levels even in the traditional slack season in 2018. However, signs about the relatively sufficient gas supply showed early in 2018. NDRC announced that over 120 bcm of natural gas supply (roughly 85.71 mn mt) had be ensured in early November. Entering the 2018-2019 heating season, the sufficient preparation and warm weather made the market largely stable. In fact, the LNG price started to decrease recently due to the approaching Spring Festival. Maybe next year, participants should care more about the announcements from the central government.