Stephen O’Sullivan

Senior Visiting Research Fellow

Stephen O’Sullivan began his oil & gas career with several years’ experience as an oil trader, economist and corporate planner in the downstream and trading divisions of BP as well as the North Sea upstream and gas divisions of Total. In 1989 he joined Coopers & Lybrand as a strategy consultant in the oil & gas consulting business, working on the privatisation and restructuring of the energy sectors across emerging markets as well as in the nuclear power and transport sectors.  He lived and worked in China, Russia, Central Asia, Eastern Europe, Southern Africa and the Middle East.

In 1995, he was appointed Head of Research and Oil & Gas Analyst at MC Securities in London, where the team was ranked number 1 in EMEA oil & gas.  Following the sale of that business to JP Morgan in 1998, he moved to Moscow as a Partner and Head of Research at United Financial Group, where he and his team were ranked the number 1 oil & gas research team and the number 1 Russia country team for seven years in a row.

After the sale of UFG to Deutsche Bank in 2005, Stephen became Head of EMEA and Latin American Research where his research team was ranked the number 1 team across all sectors, in Russia & South Africa and across the broader EMEA region in 2006 and 2007. In 2007 he moved to Hong Kong as Head of Asian Research for the Australian bank Macquarie. In 2009 he joined Barclays to lead the build-out of its Asia ex-Japan equity research business.

In 2013 he joined Trusted Sources focusing on China energy based in Hong Kong. His major research themes include China’s gas sector reform and China’s nuclear renaissance.  In 2016 following the merger between Trusted Sources and Lombard Street Research to form TS Lombard, he took on an additional role as CEO of TS Lombard Research Partners, TS Lombard’s market-facing independent analyst platform.

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                    [post_content] => China's gas demand looks set to remain relatively strong over the next several years, driven largely by government environmental policies.  Over the last decade, China's gas demand has risen more than three-fold as its economy has grown and as the government has focused on increased gas use as a route to a cleaner environment in China.  While the national oil companies have been instructed to raise domestic gas production by President Xi Jinping to support China's supply security, they are struggling to do so adequately in both the conventional and unconventional spheres.  As a result, a greater dependence on imports of gas is almost inevitable.  These imports started arriving as LNG from Australia in 2006 and as pipeline gas from Central Asia in 2010.  It is well-known that import dependency has risen steadily since gas imports began.  In 2018 it reached 43 per cent, compared with just 5 per cent a decade earlier.  What is less well-known is that LNG now represents almost 60 per cent of China's gas imports, considerably ahead of the volume of pipeline imports, a trend that started in 2017 when LNG inflows exceeded pipeline supplies for the first time.

There is undoubtedly a debate inside the Chinese government about what level of overall import dependency for natural gas is acceptable.  Given that gas has been playing a growing role in China’s plans to clean up its environment, rising import dependency may have been a necessary evil given that it helps tackle the socially contentious issue of deteriorating air quality.  The difference between rising oil import dependency and rising gas import dependency may relate, above all, to a contrast between the global political environment when China’s oil imports were initially rising strongly 10 years ago and the current political environment when the same volume growth has been true of gas.  Clearly the situation is more fraught than a decade ago.  A trade war with the US, a more difficult relationship with Taiwan and generally less forbearance on the part of many Western counterparts means that the risks of being over dependent on imported energy may well be seen by Beijing as greater today than they were a decade ago.

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                    [post_title] => China: Growing import volumes of LNG highlight China's energy import dependency
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                    [post_content] => China’s Five Year Plan envisages increased gas use at the expense of coal with the aim of improving the physical environment in the country.  But increased gas use depends both on government policy and on pricing.  Gas price reform has been a slow-moving work in progress.  Even the recent - very modest - cut in gas prices - will have no effect on Chinese gas demand.  The proposed creation of a national pipeline company, however - independent of the Chinese majors - creates the opportunity to increase competition in the end-user space, reduce prices and stimulate gas demand.  There are a number of serious challenges ahead - particularly from the NOCs, but we should get a good indication of the likelihood of progress later this year as our expectation is that government announcements about the proposed new company should take place later this year.
                    [post_title] => China Gas: Pipeline company reform has potential to stimulate gas demand but recent price cut unlikely to have any impact
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                    [post_content] => China is the world’s third-largest gas market - as well as its fastest-growing.  Government policy, economic growth and reform of its gas pricing system are driving growth in demand at double-digit rates.  The outlook for China’s gas market and its interaction with the wider world of global gas is both a major question for international gas players as well as for Chinese policymakers.  While it is primarily government policy driving gas demand today, through the coal-to-gas switching programme underway in northern China, once that ends gas pricing will be the key driver of demand.  The government faces a challenge of choosing between low domestic prices to stimulate demand and improve the environment or high prices to encourage domestic production and restrain the country’s rising dependence on expensive imports – particularly in a challenging international political environment.  The current pricing structure is a hybrid of regulation and market linkages – albeit moving in the right direction.  We identify and analyse the success stories of price reform in China and the challenges that government and industry still face – not all of them pricing-related, since they include midstream reform, infrastructure construction and access, the development of gas hubs and the inevitably serious challenge from renewables.
                    [post_title] => China’s Long March to Gas Price Freedom: Price Reform in the People’s Republic
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Diversification appears to be the response - with both pipeline gas and LNG deliveries growing but also with an increasing variety of suppliers on both these import routes.  However the developing trade war with the United States and the imposition of tariffs on LNG has removed that country as a potential supplier of gas to China - at least in the short-term.  That has implications for other gas suppliers around the world - whether existing LNG suppliers such as Qatar and Australia or potential new suppliers such as Mozambique.  Russia, also, could be a potential beneficiary of disrupted US supplies of LNG.  The Power of Siberia line commissions at the end of this year and Russia will become China's most important new supplier in recent years.  China may also look more favourably on additional pipeline deals with Russia given its resource base and its desire to reach agreement on further gas projects.  China for its part will want to maintain diversity in both suppliers and supply routes to ensure it retains maximum operational and commercial flexibility in its gas supplies.
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Latest Publications by Stephen O’Sullivan