WoodMac: China on top of the LNG market
With Japan’s LNG demand in decline, China is set to become the world’s largest LNG market this year, according to energy intelligence group Wood Mackenzie.
Wood Mackenzie, in its APAC Energy Buz, reports that after a slow 2020, Asian LNG demand returned to growth in the first five months of 2021, with China as the single biggest contributor.
WoodMac’s Gavin Thompson spoke to Xueke Wang from the Asia Pacific gas research about China’s surging LNG market.
Wang feels that China’s LNG demand has taken the entire industry by surprise.
Some of his inputs include:
- LNG demand is also supported by strong growth within key sectors. Rising electricity consumption has been in the spotlight since the start of 2021, driven by China’s economic recovery. Strong electricity demand has been a key driver for increased LNG imports in southern China in particular.
- Spot LNG has been the most competitive gas import option into China for the past two years. But rising prices have now brought this competitive advantage to an end, and LNG may well become a cost-disadvantaged supply option versus pipeline imports over the next two years.
- Australia is still China’s largest LNG trading partner.
- An economic slowdown or a resurgence in Covid restrictions could reverse the positive outlook of China’s LNG demand. But the potential for an increase in supply from domestic production and more rapid growth in Russian pipeline imports needs to be considered as well. Domestic production achieved 12 per cent year-on-year growth in the first quarter of 2021 to ensure supplies during the heating season, while piped gas imports also increased, rising by 5 per cent year-on-year.
The researchers feel that China looks certain to remain the world’s top LNG importer for the years to come.