China Gas Market

8/10/2019 China Gas Market

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ICIS China Gas Market Webinar

13 November 2014Ricki Wang, Senior Industry Analyst ICIS China

Ben Wetherall, Head of Gas ICIS Energy

Click here to access the recording of thewebinar - http://bcove.me/41zphdnz
http://bcove.me/41zphdnzhttp://bcove.me/41zphdnzhttp://bcove.me/41zphdnz


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ICISMarket intelligence forthe energy, chemical

and fertil izerindustries


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You can rely on ICIS to stay up to date with the latestdevelopments in China natural gas

Reliable pricing informationThe ICIS China Gas Markets Report enables you to understand

price drivers and fluctuations and settle your contract prices more

confidently by giving you access to delivered and import LNG prices

as well as information on shipping information, market moving

news, operating rates and turnaround schedules.

Comprehensive supply and demand data and analysis The ICIS China LNG Supply/Demand & Investment Opportunities

Report provides detailed information on the LNG demand outlook

for China broken down by 24 key provinces, autonomous regions

and municipalities. In addition, it provides important information ondomestic policies, infrastructure developments and other key factors

for consideration when making investment-related decisions.

Request a samplereport >>

Enquire about thereport >>
http://www.icis.com/contact/enquire-about-china-lng/?region=china&channel=energy&commodity=liquefied-natural-gas&cmpid=PLC|ENER|CHHNT-2014-GLOBAL-china-EL-LNG-supplydemand-research&sfid=701w0000000vTw8http://www.icis.com/contact/request-free-sample-price-reports/?commodity=gas&channel=energy&region=china&cmpid=EMC|ENER|CHONE-2014-GLOBAL-webinar-naturalgas-preevent&sfid=701w0000000vlKlhttp://www.icis.com/contact/request-free-sample-price-reports/?commodity=gas&channel=energy&region=china&cmpid=EMC|ENER|CHONE-2014-GLOBAL-webinar-naturalgas-preevent&sfid=701w0000000vlKlhttp://www.icis.com/contact/enquire-about-china-lng/?region=china&channel=energy&commodity=liquefied-natural-gas&cmpid=PLC|ENER|CHHNT-2014-GLOBAL-china-EL-LNG-supplydemand-research&sfid=701w0000000vTw8http://www.icis.com/contact/enquire-about-china-lng/?region=china&channel=energy&commodity=liquefied-natural-gas&cmpid=PLC|ENER|CHHNT-2014-GLOBAL-china-EL-LNG-supplydemand-research&sfid=701w0000000vTw8http://www.icis.com/contact/enquire-about-china-lng/?region=china&channel=energy&commodity=liquefied-natural-gas&cmpid=PLC|ENER|CHHNT-2014-GLOBAL-china-EL-LNG-supplydemand-research&sfid=701w0000000vTw8http://www.icis.com/contact/request-free-sample-price-reports/?commodity=gas&channel=energy&region=china&cmpid=EMC|ENER|CHONE-2014-GLOBAL-webinar-naturalgas-preevent&sfid=701w0000000vlKl


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Content

Overview of Chinas Gas Market


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Chinas Energy Mix (2006-2020)

68 68 69

63

56

19 19 18

18

17

4 5 5

8

12

8 8 811

15

40%

50%

60%

70%

80%

90%

100%

2005 2006 2007 2008 2009 2010 2011 2012 2015E 2020E

Coal Petroleum Natural Gas Non-fossil Energy

Source: NBS, ICIS C1 Energy

Chinas Energy Mix

Under environment pressure,

Chinese government is

encouraging clean energy

usage.

Natural gas consumption is

going to reach 15% of total

primary energy mix by 2020.


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Chinas natural gas Supply and Demand

67

123

170

25

26

43

14

62

148

20%

13%12%

0%

5%

10%

15%

20%

25%

0

100

200

300

400

2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E

Net Import Export Production Consumption Growth Rate

bcm

Source: ICIS

13

Forecast of Chinas Natural Gas(2007-2019E)


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Gas Consumption by region in 2012

7

Xinjiang Uygur

autonomous region

Tibet autonomous

region

Qinghai

Gansu Inner Mongoliaautonomous region

Ningxia

Sichuan

Yunnan

Guizhou

Guangxi

Hainan

Guangdong

MacaoHong Kong

Hunan

Chong

qing

Hubei

Jiangxi

Fujian

Zhejiang

AnhuiJiangsuHenan

Shaanxi

Shanxi

Hebei

Shandong

Tianjin

BeijingLiaoning

Jilin

Heilong

jiang

Shanghai

Consumption

volume Large Small

Source: ICIS C1 Energy


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LNG Consumption by region in 2013

Large

Small


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Gas Distribution

CityGas

Industry

FertilizerGas

PowerPlant

29% 35%

22%14%

Forecast of China's Natural Gas Consumption by Sector(2013-2017E)

0%

20%

40%

60%

80%

100%

2013E 2014E 2015E 2016E 2017E

City gas Industrial/Commercial fuel

Chemical feedstock Fuel for power plantsSource: ICIS C1 Energy

2013 Chinas NG consumption by Sector


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Domestic Gas Supply


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PetroChina is the largest gas supplier

Most of the conventional gas belongs

to PetroChina, Sinopec, CNOOC

Domestic Natural Gas Supply

66.6

123.2132.1

169.7

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0

20

40

60

80

100

120

140

160

180

2 00 7 2 00 8 2 00 9 2 01 0 2 01 1 2 01 2 2 01 3 2 01 4E 2 01 5E 2 01 6E 2 01 7E 2 01 8E 2 01 9E

Production Growth RateSource: ICIS

bcm

Forecast of Chinas Gas Production(2007-2019)

PetroChina

Yanchang

PetroleumGroup

Sinopec

CNOOC

C. China

NW. China

N. China

S. China

SW. China

E. China


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Unconventional Gas Development

Conventi

al Gas

57%

ImportPipeline

18%

Import

LNG

14%

SNG

4%

CBM

Shale Gas

3%

2015

Conventional Gas

ImportPipeline

Gas

ImportLNG

SNG CBM Shale Gas

2015 138.5 45 34.7 10 9 6.52017 165 65 47.2 32 17 10

0

20

40

60

80

100

120

140

160

180

billion cubic meters

Source: ICIS C1 Energy

Supply target set by China government(2015, 2017)

49%

19%

14%

10%5% 3%

2017


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Unconventional Gas Distr ibut ion

Northern China

North East China

East ChinaSouthern China

Central China

South West China

North West China

ShaleGas

Shale Gas

ShaleGas

ShaleGas

CBM

SNG

SNG


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Gas Import in China


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Chinas Gas Import

Forecast of Chinas Gas Import(2007-2019E)

Chinas Gas Import(2006-2014E)

0%

50%

100%

150%

200%

250%

300%

350%

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2006 2007 2008 2009 2010 2011 2012 2013 2014 E

NG Import LNG Import Annual Growth Rate

10,000 tonne

Source: GAC

3.9

64.2

76.1

152.6

323.9%

21.2% 18.6% 18.8%

0%

50%

100%

150%

200%

250%

300%

350%

0

20

40

60

80

100

120

140

160

180

2 007 2 00 8 20 09 2 010 2 01 1 20 12 2 01 3 2 01 4E 20 15E 2 016 E 2 01 7E 20 18E 2 019 E

Import Growth RateSource: ICIS

bcm


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Shanghai

Putian

Ningbo

Qingdao

Tangshan

Dalian

Shenzhen

JOVO

Hainan

Tianjin

Guangxi

Zhoushan

Rudong

East-west P II

East-West P III

China Russia GasPipeline

Myanmar GasPipeline

East-West P IV

Import LNG

Zhuhai

Gas Import Infrastructure


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Gas Import by Source

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2006 2007 2008 2009 2010 2011 2012 2013 2014 E

Qatar LNG Australia LNG IndonesiaLNG Malaysia LNG

Other Countries LNG Turkmenistan Others

10,000 tonne

Source: Gac


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Import Gas Price

0

2

4

6

8

10

12

14

16

18

20

2006 2007 2008 2009 2010 2011 2012 2013 2014 E

Qatar Import LNG price

Australia Import LNG price

Indonesia Import LNG price

Malaysia Import LNG price

Other Countries Import LNG

price

Turkmenistan Pipeline

Import price

Other Pipelien Import price

$/MMBtu

Source: GAC


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Content

Price Reform


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Evaluation of Chinas Gas Pricing Mechanism

Base on Cost

Base on Cost

Before 2005 2010 2012 2013-2015 After 2020

Price ReformTwo Tier

Pricing +Base on Cost

Two TierPricing

Hub Price

Government Set and

Guide the Price

Market Orientation


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Price Formula

Coefficient

Import Price Import Price

VATThermal Value


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Regional Gas Price

Government-capped City-gate Prices of Natural Gas by Province/Municipality/Region

Province/Municipality/Region

Price for existing consumption Price for outstanding consumption

RMB Yuan/cbm USD $/MMBtu RMB Yuan/cbm USD $/MMBtu

Beijing 2.660 11.68 3.140 13.79

Tianjin 2.660 11.68 3.140 13.79

Hebei 2.640 11.59 3.120 13.70

Shanxi 2.570 11.29 3.050 13.40

Inner Mongolia 2.000 8.78 2.480 10.89

Guangdong 2.860 12.56 3.320 14.58

Guangxi 2.690 11.81 3.150 13.83

Heilongjiang 2.420 10.63 2.900 12.74

Shanghai 2.840 12.47 3.320 14.58

Jiangsu 2.820 12.39 3.300 14.49

Zhejiang 2.830 12.43 3.310 14.54

Anhui 2.750 12.08 3.230 14.19

Jiangxi 2.620 11.51 3.100 13.62

Shandong 2.640 11.59 3.120 13.70

Note: The price is inclusive of value-added tax (VAT).

Source: National Development and Reform Commission


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Impact of Price Reform

Upstream

Middle stream

Downstream

Gas Power PlantIndustry Vehicle Fertilizer

Supplier

LNGterminal

Domestic LNG plant Pipeline

Import LNG


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Government PoliciesPipeline Gas

Commercial

Gas Field Purify Pipeline City Gate Pipeline

Fertilizer

City Gas

Gas Power Plant

Industry

Vehicle

Citizen

Upstream Transportation

Downstream

LNG trucks

Vehicle

Gas refill station

Domestic LNG plant


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Content

Chinese gas market reforms ina regional context


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Chinese import requirements uncertain but wil l impact wider region

Chinese domestic shale gas productionuncertain. Government cuts targets

30Bcm by 2020 down from 60-100Bcm

in original 2011-2015 development plan.

Imports from Turkmenistan set to reach

30Bcm in 2014, up to 65Bcm by 2021.

Russia-China pipeline agreement via

Eastern Route up to 38Bcm/year .

Gazprom-CNPC sign framework

agreement in Nov 14 for 30Bcm/year via

Altai (Western Route).

Chinese buyers have signed SPAs to

import more than 50mtpa of LNG in

2020

38%

5%6%

24%

6%

17%

4%

China holds more than 50mtpa in LNG SPAsin 2020

Australia

Indonesia

Malaysia

Qatar

Russia

Portfolio Supply

Papua New Guinea

Chinas LNG imports compared wi th NE

Asia08 09 10 11 12 13 14

endSept

ChinaLNGimports (mt)

3.37 5.74 9.6

0

13.1 14.65 18.6 14.67

Chinese LNG imports as percentage of regional

demand

NEAsia

3.05 5.47 7.72 9.4 9.62 11.65 12.35


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New Russian pipeline imports competitive with LNG

10.00

11.00

12.00

13.00

14.00

15.00

16.00

LNGP

ric

es-$/MMBtu

Selected LNG and pipeline impor t prices to China on forward curve (12 Nov 2014)

US liquefaction DES Asia (Cheniere)* Qatar/China DES

Russia-China (Shanghai delivery estimate) Australia/China 2011/12

Australia/China CSG S-Curve* from Corpus Christi statement - March 2014

source: ICIS, CME and NYMEX


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Japan tr ies to align liberalisation and lower price goals


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Chinese price reform raises questions for new contestable LNGsupply

Eni and Anadarko developing multi-trainproject in Mozambique. Eni also plan 2.5mtpa

FLNG project offshore Area 4 CNPC holds a 30% stake in Eni-led

consortium developing Area 4.

East Africa

Nine liquefaction projects at various stages ofdevelopment in Western Canada have been given

export approval PetroChina and Sinopec stakeholders in two LNGprojects

Cost challenges and uncertainty over royalty tax

Regulatory issues over Western US greenfield projects

North America

Australian greenfield and FLNG projects undercosts pressure Browse, Bonaparte,

Scarborough Russian LNG (Sakhalin

expansion/Vladivostok, Yamal LNG) questionsover financing, technology.

Australia/Russia


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You can rely on ICIS to stay up to date with the latestdevelopments in China natural gas

Reliable pricing informationThe ICIS China Gas Markets Report enables you to understand

price drivers and fluctuations and settle your contract prices more

confidently by giving you access to delivered and import LNG prices

as well as information on shipping information, market moving

news, operating rates and turnaround schedules.

Comprehensive supply and demand data and analysis The ICIS China LNG Supply/Demand & Investment Opportunities

Report provides detailed information on the LNG demand outlook

for China broken down by 24 key provinces, autonomous regions

and municipalities. In addition, it provides important information on

domestic policies, infrastructure developments and other key factors

for consideration when making investment-related decisions.

Request a samplereport >>

Enquire about thereport >>
http://www.icis.com/contact/request-free-sample-price-reports/?commodity=gas&channel=energy&region=china&cmpid=EMC|ENER|CHONE-2014-GLOBAL-webinar-naturalgas-preevent&sfid=701w0000000vlKlhttp://www.icis.com/contact/enquire-about-china-lng/?region=china&channel=energy&commodity=liquefied-natural-gas&cmpid=PLC|ENER|CHHNT-2014-GLOBAL-china-EL-LNG-supplydemand-research&sfid=701w0000000vTw8http://www.icis.com/contact/request-free-sample-price-reports/?commodity=gas&channel=energy&region=china&cmpid=EMC|ENER|CHONE-2014-GLOBAL-webinar-naturalgas-preevent&sfid=701w0000000vlKlhttp://www.icis.com/contact/request-free-sample-price-reports/?commodity=gas&channel=energy&region=china&cmpid=EMC|ENER|CHONE-2014-GLOBAL-webinar-naturalgas-preevent&sfid=701w0000000vlKlhttp://www.icis.com/contact/enquire-about-china-lng/?region=china&channel=energy&commodity=liquefied-natural-gas&cmpid=PLC|ENER|CHHNT-2014-GLOBAL-china-EL-LNG-supplydemand-research&sfid=701w0000000vTw8http://www.icis.com/contact/enquire-about-china-lng/?region=china&channel=energy&commodity=liquefied-natural-gas&cmpid=PLC|ENER|CHHNT-2014-GLOBAL-china-EL-LNG-supplydemand-research&sfid=701w0000000vTw8http://www.icis.com/contact/request-free-sample-price-reports/?commodity=gas&channel=energy&region=china&cmpid=EMC|ENER|CHONE-2014-GLOBAL-webinar-naturalgas-preevent&sfid=701w0000000vlKlhttp://www.icis.com/contact/enquire-about-china-lng/?region=china&channel=energy&commodity=liquefied-natural-gas&cmpid=PLC|ENER|CHHNT-2014-GLOBAL-china-EL-LNG-supplydemand-research&sfid=701w0000000vTw8


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