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China's Dec 2019 gas import growth slows on weak demand, higher domestic production

Highlights

Dec imports rise 3% on year, 2019 imports up 7% on year

Slower economy, policy adjustments cap demand growth

PetroChina registers largest annual production increase in 2019

Singapore — China imported 9.51 million mt of natural gas in December 2019 and 96.56 million mt for the whole of 2019, up 3% and 6.9% year on year, respectively, latest data released Tuesday by the General Administration of Customs showed.

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The year-on-year growths shrank significantly from the 17.5% expansion in December 2018 and 31.9% increase in 2018 due mainly to slower market demand amid higher domestic gas production, market sources said.

China's natural gas demand has been slowing since early 2019 due to a combination of factors that included an economic slowdown, softer coal-to-gas switching policy, adjustment of electricity policy and stricter emission restrictions, according to market sources.

China's industrial production growth came in at just 5.6% year on year in the first eleven months of 2019, compared with 6.3% in the same period last year, data from the National Bureau of Statistics showed.

China's gross domestic product growth rate continued to slow in the third quarter of last year at 6%, compared with 6.4% in Q1 and 6.2% in Q2, according to the NBS data.

POLICY ADJUSTMENT

In addition, the National Energy Administration said last July it would encourage regions to choose the most accessible form of energy to guarantee heating during winter. It also offered support for cities to build centralized "clean coal" heating systems, S&P Global Platts reported previously.

"This was expected to have encouraged more consumption of coal and hence reducing natural gas consumption as gas is much more expensive than that of coal in China," a source in southern China said.

Besides, growth in gas demand from the power generation sector had slowed down substantially in 2019, on the back of subsidy cuts and low electricity margins, sources at power utilities said.

China reduced electricity fees for industrial and commercial users by 10% last year, in a bid to support the economy, Platts reported previously.

The move, however, squeezed power sector margins, forcing some gas power plants to lower their operation rates, market sources noted.

As a result, China's natural gas demand from its power generation sector rose only 1.9% year on year in 2019, compared with an 18% growth in 2018, data from state-owned CNPC's Economics & Technology Research Institute showed.

Moreover, China tightened emission restrictions in 2019, which was said have slowed the production activity at some gas-fired factories, hence affecting their gas demand, market sources said.

China's natural gas demand from its industrial sector grew 9.3% year on year in 2019, down from an 18.1% expansion in 2018, CNPC ETRI's data showed.

HIGHER PRODUCTION

Apart from weak demand, higher domestic production is believed to have also curbed LNG imports in 2019, market sources said.

China is estimated to have produced 173.3 Bcm of natural gas in 2019, up 9.6% or 15.2 Bcm from 2018, when output had reached a record high and the annual increase in volume was the largest in the past 10 years, according to the latest data from CNPC ETRI.

CNPC, or PetroChina, which produces nearly 70% of China's total gas output, had said it had registered the largest annual increase in natural gas production in 2019.

PetroChina's Changqing Oilfield, the largest gas field in China, produced 41.2 Bcm of natural gas in 2019, up 2.5 Bcm or 6.4% from 2018, while its Southwest oil and gas field produced 27.9 Bcm of natural gas in 2019, up 4.2 Bcm or 18.6% from a year ago, according to company data.