China gas and power month in brief: positive dynamics for gas, LNG and coal Report

Insight 30 June 2017

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Report summary

Driven by coal-to-gas switching in the industry sector, China’s gas demand performed strongly in May. Overall demand was up by 18.5% and LNG imports more than doubled. The NOCs ramped up contractual LNG volumes and became more active in the spot market. Midstream reform in the gas value chain gathers momentum – with a tighter city-gas distribution margin control we expect to see more demand upside to be unlocked. The new Qidong terminal had a difficult commissioning, which may undermine Guanghai's credibility as an emerging LNG player. On the power side, demand continues to decelerate, dragged down by energy-intensive industries. The NDRC announced to elevate on-grid tariffs to ease coal generators’ sustained financial hardship. Clean energy hit a new provincial record in Qinghai, a landlocked inland province. Local demand was met purely from renewables for 168 hours.

Executive summary
Markets
- Coal-to-gas switching underpins strong gas demand growth
- Milder power demand growth in May and what’s next?
Policy
- Tariff uplift to ease coal generators’ financial hardship
- Gas distribution margin control unlocks upsides for China gas market
- Qinghai province takes a big step towards clean energy supply
Corporate activity
- The Qidong LNG Terminal commissioned through trial and error
Smog watch
- The rain, the sunshine, the heat – summer has arrived