WoodMac says Chinese NOC’s facing oversupply

WoodMac: Chinese NOC's facing oversupply

Just 12 months ago, the Chinese gas market looked set to continue its relentless pace of growth, which averaged over 15% annually during the previous decade.

However, due to a range of underlying factors – including weaker economic growth, low oil prices, mild weather and high domestic gas prices – demand growth for 2014 reached just over 5%, WoodMac reports.

Figures for Q1 suggest this disappointing pattern is continuing into 2015 with weak demand compounding existing market challenges, leaving all three National Oil Companies over-contracted on domestic and imported supply.

Consequently, the outlook for domestic investment and production is challenging. While Wood Mackenzie continues to see production growth, it expects the NOCs to curtail domestic output growth from some projects by as much as 25 bcm between 2015-17 compared to our previous  forecasts.

To minimise losses, the NOCs will pursue a number of options. Firstly, the NOCs will maximise contracted LNG volumes to sell into the domestic market particularly as term and spot prices look competitive against regulated City Gate tariffs due to the low oil price. Secondly, PetroChina will manage overall volumes of pipeline imports using take-or-pay provisions, with the potential for spot volumes above take-or-pay during periods of peak demand. Thirdly, Wood Mackenzie expects the NOCs will restrict some domestic investment in more expensive developments and defer investment until demand recovery.

Even so, China will be unable to absorb all contracted LNG and some volumes will need to be re-sold into an already over-supplied Pacific market. Given the extent of the slowdown in gas demand growth, all options must be carefully considered.


Image: Wood Mackenzie

Share this article

Follow LNG World News


<< Jan 2020 >>
30 31 1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30 31 1 2

LNG Pricing, Trading & Hedging: 3-Day Training Course – London / Mar 2020

This three-day training program provides a unique opportunity to learn and apply the practical skills…

read more >

American LNG Forum 2020

The American LNG Forum is your gateway to learning about the US LNG export industry,

read more >

2nd Global LNG Forum

Global LNG Forum is an exclusive networking and knowledge-sharing platform for top experts and business leaders in the industry.

read more >

LNG Pricing, Trading & Hedging: 3-Day Training Course – Houston / Feb 2020

This three-day training program provides a unique opportunity to learn and apply the practical skills, knowledge and tools needed to:…

read more >