Outlook for China’s gas balances

China’s gas demand has surged on the back of the government’s coal-to-gas switching policy, leading China to absorb an incremental 17 bcm of LNG in both 2017 and 2018. While Beijing remains committed to its environmental targets, the economic slowdown is set to adversely impact industry—currently the largest gas consumer in China—reducing industrial users’ gas use and limiting their appetite for further coal conversions. As a result, the Chinese government could opt to slow coal conversions through 2020, slowing gas demand growth to more modest levels of around 10% y/y, compared to 15% growth in 2017-2018. At the same time, rising concerns about supply security due to the escalating US-China trade war will reinforce the government’s resolve to encourage domestic production and could also expedite pipeline negotiations with Russia and Central Asia. As a result, even though China’s gas demand growth will remain robust over the next few years, the economic outlook and supply security concerns could reduce the call on LNG from its 2017-2018 highs.

By: Michal Meidan

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China , China Energy Programme

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