China's natural gas imports expected to scale up in 2018 General,  Policy,  Import & Export 2018-02-02 15:52:00

China is expected to further scale up its natural gas imports in 2018, to support its ambitious coal-to-gas heating conversion plans and pledges it committed recently in Davos – in three years, skies will be blue again.

China's natural gas consumption has been rising since the start of 2017. The imports totaled 68.72 million tonnes last year, 28.11% more than a year ago.

Hindered by pipeline construction, pipeline gas imports increased slowly to 31.06 million tonnes, which is still 8.78% more than a year ago; liquefied natural gas (LNG), mainly seaborne shipped and very convenient for distribution, became the major supply force in the gas market, which totaled 38.29 million tonnes, jumping 46.39% year on year and accounting for 55.71% of the total imports.

In December, the consumption peak period of the winter heating season, gas demand surged to the highest over the year after the country rolled out heating projects of switch from coal-fueled boilers to natural gas in the vast northern region, even though the country's three major gas frims extracted the clean energy at full steam.

Natural gas imports hit a record high at 7.89 million tonnes in the month, soaring 30.09% compared with the same period a year ago. Pipeline gas totaled 2.86 million tonnes, up 14.62% on the year prior and LNG shipment also stood historical high at 5.03 million tonnes, up 34.73% on the year and 23.99% more than a month ago.

"Growth in domestic production far lagged behind demand last year, so there was a large supply gap that had to be fed by imports," said an energy analyst with Zhongyu Information.

Shandong, Shanxi, Henan, Hebei and Shaanxi went through a hard time of gas supply shortage in December that they had to halt industrial supply for home heating.

Hebei announced it decided not to add new "coal-to-gas" projects in rural areas this year, a month after the country eased the enforcement of coal-to-gas conversion by allowing coal burning again in northern villages.

"But the suspension can't change the supply-demand unbalance fundamentally in the country," the analyst said. "Many places have preliminarily completed the pipeline installation. That's a big cardinal number so that gas consumption will go up further in 2018."

Any state-allowed natural gas import projects can receive their import VAT back in accordance with proportion of their import prices and the state-ruled sales prices until December 31, 2020, if their import prices are higher than the sales prices the state ruled, said a notice jointly issued from the Financial Ministry, the General Administration of Customs and the State Administration of Taxation.

Sun also said natural gas imports are expected to surge higher when China-Russia eastern natural gas pipeline completes in 2019. By then, natural gas will continuously flow from the middle Asia, Myanmar and Russia.

(Writing by Alex Guo  Editing by Harry Huo)
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