As gas use surges, China sees "harsh" winter without more supply

By Aibing Guo on 10/19/2017

HONG KONG (Bloomberg) -- Chinese regulators warned that the nation may face a “harsh” supply situation this winter if natural gas supplies can’t keep up with its booming demand.

Surging use of the fuel -- powered by President Xi Jinping’s pro-gas policies -- combined with inadequate infrastructure such as pipeline connections and storage, may create a severe supply shortfall as weather turns colder, the National Development & Reform Commission said in a statement Thursday. The nation’s top regulator called on state-run producers to ensure sufficient supply.

State owned oil and gas companies China National Petroleum Corp., China Petrochemical Corp. and China National Offshore Oil Corp. should raise production year-on-year this winter to meet the increased demand, the NDRC said. Output from unconventional sources, including coal-bed methane, shale gas and coal-to-gas projects, should also rise, it said.

China’s natural gas consumption has surged almost 18% during the first eight months of the year, according to the latest available data from NDRC, amid the shift by the world’s second-largest economy away from dirtier fuels like coal and petroleum in an effort to clean the air in its smog-choked cities.

Natural gas output in September rose 11% to 11.2 Bcm, lifting total output during the first nine months of the year by 9.1%, according to data released National Bureau of Statistics on Thursday.

“China has to raise gas prices to provide extra incentives to producers to deliver more,” said Laban Yu, head of Asia oil and gas equities at Jefferies Group LLC in Hong Kong. Higher prices would also cut “unnecessary consumption from low-margin industrial users.”

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