China is set to import massive amounts of LNG in 2019 as part of its determined push to switch away from coal and toward the lower emissions natural gas, but this robust demand is unlikely to curb the current inventory glut in Asia, according to Reuters, citing Fereidun Fesharaki, chairman of energy consultancy FGE.
While China’s LNG demand growth is set to increase by 14 percent in 2019 over 2018 levels—between 30 billion and 40 billion cubic meters—it’s lower than the 2018 demand growth of 18 percent, according to data from the National Development Reform Commission. This demand growth is also likely to be lower than supply, which has increased dramatically over the last year as Australia, United States, and Russia increase production.
New production for LNG this year is expected to surpass LNG demand by 2 percent, according to Reuters calculations. This lopsided equation is unlikely to improve LNG prices which have plummeted about 60 percent in the last six months alone.
On the demand side of the equation, these low LNG prices are still above pipeline gas prices, and as the new Russia pipeline comes onstream to carry gas to China, demand for LNG may falter, CNPC’s Ling told Reuters last week, although this is still many months away from completion.
The Russia to China pipeline, dubbed the Power of Siberia, is expected to come online in December 2019.
China continues its effort to switch away from coal, with an eye on lowering coal’s percentage of its energy mix to 35 percent in 2040 to 60 percent in 2017, according to BP estimates as published in the BP Energy Outlook 2019. China’s domestic natural gas production has so far been unable to ramp up as quickly as they would like, leaving imports to fill the gaps on the road to reduced coal consumption.
News Source: Link