x Abu Dhabi, UAEWednesday 26 July 2017

China lifts its gas use in first half

Growing demand is good news in hard times for producers, propping up a global industry that has seen a supply glut push down prices.

China's use of natural gas jumped by 22 per cent in the first half of the year from the previous six months, government figures showed yesterday, propping up a global industry that has seen a supply glut push down prices. China's insatiable demand for energy has steered the direction of the world oil market for years but the country's power industry and manufacturing are now turning increasingly to gas, with a new emphasis on shipping in the fuel from Qatar and other Gulf states. Chinese demand for tanker imports will increase fourfold by 2020, according to a study released yesterday. That could make up for the weaker-than-forecast growth in US demand and a flat outlook for liquefied natural gas (LNG) in Japan and South Korea.

Wood Mackenzie, an energy consultancy, raised its forecast for China's imports of LNG in 2020 by 48 per cent to 46 million tonnes a year. The country imported 5.5 million tonnes last year and is expected to buy 9 million tonnes this year. "This will expand the opportunity for LNG suppliers seeking to secure markets," Gavin Thompson, the firm's gas analyst, said in a report. Its imports were likely to decrease after 2020 as the country increased domestic gas output, he added.

The robust growth this year was boosted by government directives to substitute gas for dirtier coal and oil to meet emissions goals, the national development and reform commission said yesterday. Gas imports rose by 160 per cent in the latest half from the same period last year after the start-up of a pipeline from Turkmenistan and increased LNG imports, it said. Chinese demand for imports could not grow fast enough for the LNG industry, which is reeling from an oversupply caused by the addition of new capacity, the economic slowdown and decreased imports in the US.

The oversupply has given the upper hand to Asian buyers to re-negotiate supply contracts, said Jean-Fracois Seznec, a Gulf energy expert and a visiting associate professor at Georgetown University in Washington. Most LNG exports to Asia are not priced on an open market but linked to crude import prices. In the US, the price is determined by the domestic open market for gas, meaning import prices there are about a third of those paid by east Asian buyers.

"There's no need for Qatari gas [in the US], so all these millions of tonnes are floating around, looking for a buyer," Mr Seznec said last week. "In the reality of energy transactions, there's no such thing as a long-term contract, so the contracts will be renegotiated and Qatar will see its income decline very substantially." * with agencies cstanton@thenational.ae