What international gas players need to know about the Chinese market

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Jun Bai, Deputy Director, Institute of International Energy, International Cooperation Center, National Development and Reform Commission
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Gastech News: Following the first shipment of US LNG to China thanks to the newly expanded Panama Canal, how will the energy relationship between China and the US evolve? Will China become the most significant buyer of US LNG?

Jun Bai: China and the US are the world's top two energy consumers and both countries have shown their leadership in fighting climate change and bolstering a clean energy future. The countries have had cooperation in areas such as renewable energy development and energy efficiency. China has big potential in gas demand while the US has big potential in gas supply. It's a natural match. The US needs to take actions to facilitate its LNG exports to countries no matter with which a free trade agreement was in place or not. Expanded LNG trade between China and US benefits both countries.

Gastech News: How much LNG is China likely to import by 2030? And will the country manage to improve its domestic gas production by 2020?

Jun Bai: There are many uncertain factors that decide how much LNG China will import by 2030, for example, domestic production level, production cost, international supply conditions, LNG infrastructure, pipeline imports, gas demand and price. If all conducive factors are in place, China's LNG imports could easily double by 2020 and triple by 2030 from the 2015 level.

Domestic gas production will certainly increase by 2020, as major producers are gearing toward more gas exposure in both conventional and non-conventional fields while new entrants begin to gain a foothold. In the first seven months of this year, non-conventional gas output in China more than doubled from a year earlier to 9.6bcm, in which shale gas production amounted to 5 bcm, rocketed up by over 7 times compared with the same period last year.

Gastech News: What do international gas players need to know about entering the Chinese LNG sector?

Jun Bai: China is mulling a systematic reform of its oil and gas sector. It intends to introduce more competition, step up supervision on gas infrastructure and free up gas prices.  This will foster an environment beneficial to international gas players.  My suggestions for them would be: have a clear understanding of the ongoing regulatory changes and their impact, follow changes in gas market fundamentals.

Gastech News: Talking about the future of gas pipelines in China, should we expect to see a boom?

Jun Bai: China needs a pipeline and storage boom and it will definitely happen. We do see a lot of obstacles need to be overcome before a boom happens.

In August, the NDRC published tentative plans on pipeline tariff regulation and sought for public comments and suggestions. The first ever move is a right move toward clarifying the cost of gas transportation and setting proper pipeline investment returns.  Of course, there are concerns whether the proposed 8% return rate could attract investors. We believe the government will consider new moves to facilitate gas pipeline and storage expansion if existing measures were not enough to incentivise market players.

Gastech News: What are you most looking forward to at the upcoming GAS Asia Summit in Singapore?

Jun Bai: Asia countries need more cooperation to help foster a more liberalised gas market and a pricing system that reflects local market fundamentals amid a changing global gas landscape. The GAS Asia Summit would be a good platform to facilitate exchanges among regulatory bodies, producers, consumers, traders and all service providers.

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Mr Jun Bai will be participating in a “Country Focused Session - China” at the upcoming Gas Asia Summit & Exhibition (GAS) which returns in its 4th edition to the Marina Bay Sands in Singapore from 26 to 28 October 2016.  Book your delegate place today and join over 300 international & regional c-level executives, decision makers & technology providers to discuss the dynamics that are revolutionising the Asian gas market today.

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