The dramatic increase of natural gas imports into China in 2017 is yet another sign of China’s determination to restructure its energy infrastructure to address its long-term climate change and ecological challenges. It also foreshadows the gradual balancing of worldwide natural gas supply and demand over the next dozen years or so. For the foreseeable future, as worldwide supply and demand of natural gas seesaws, price fluctuations will be a constant feature of this market.
In the first eleven months of 2017, China’s natural gas demand soared by 18.9% to approximately 102 million MT, greatly exceeding the 6.6% rise in the 2015-2016 period. Yet, the boom in natural gas consumption in China is still in its early stages. As of 2015, natural gas accounted for only 5.9% of all fossil fuel use in China, far less than the world’s average of 23.7%. As supply from the U.S. grows with the completion of its LNG export infrastructure and other sources of supply come on-line as China’s natural gas infrastructure matures, it wouldn’t be surprising if China’s natural gas demand approaches world averages or that China becomes the world’s largest importer of natural gas.
Responding to Beijing’s directives to reduce air pollution, local governments throughout China have embarked on programs to convert industrial and residential coal-fired furnaces to natural gas, setting the stage for the largest increase in natural gas demand in China in history. Because the growth in construction of natural gas storage facilities and a network of pipelines has lagged the rise in demand for natural gas, this winter has seen dramatic price increases and some retrenchment to coal. That, in turn, has given domestic natural gas suppliers a larger piece of the domestic Chinese market, which they had lost due to low natural gas prices worldwide.
In 2017, natural gas imports into China grew explosively, rising 48.4% compared to 2016 imports. In 2017 China’s natural gas imports totalled 37.9 million MT, exceeding natural gas imports to South Korea (totalling 36.5 million MT) for the first time. In December 2017 alone, China imported 5.05 million MT of natural gas.
China’s natural gas import boom was delayed while China began to build out the infrastructure necessary to import and distribute natural gas. China now has more than 10 LNG import terminals with a capacity of at least 25 million MT/year. There are now nearly 100 plants in China with a total capacity of at least 12 million MT/year capable of processing natural gas.
As of early 2017, fully 65% of all natural gas imports into China came from two destinations: Australia and Qatar. In 2016 only 1% of China’s natural gas was imported from the U.S. As the U.S. aggressively builds out LNG export terminals, estimates are that by 2022, the U.S. will account for some 40% of all worldwide natural gas trade. Fully 60% of all new LNG export terminal construction is occurring in the U.S.
Though China now is the world’s second-largest importer of natural gas, one measure of future growth is the substantial difference between China’s imports and those of Japan, the world’s largest LNG importer. In 2017 Japan imported 81.6 million MT of natural gas. Analysts are estimating that within 10 years, China’s imports of natural gas will surpass that of Japan.
Natural gas imports into China from all sources accounted for 40% of total natural gas demand in China in 2017 and of total imports of natural gas into China, 54% was in the form of LNG.
With China’s growth in natural gas imports as the key impetus, it is estimated that worldwide natural gas demand will grow from 286 million MT in 2017 to 530 million MT by 2030.
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