China’s natural gas demand is expected to expand at half the rate this winter compared to a year earlier, as Beijing slows its gasification push due to a weaker economy and competition from cheaper coal, state oil officials said on Friday.
Gas demand this winter is forecast at 145 billion to 150 billion cubic meters (bcm), 5-8% higher than a year before, said a gas marketing executive with state energy group Sinopec Corp.
Meng Yadong, director of the marketing department of Sinopec Gas Co, told an industry seminar in Beijing the growth is down from the 14.6% expansion in the previous heating season.
To battle air pollution and cut carbon emissions, Beijing has embarked on an aggressive gasification campaign since 2017 to replace coal with gas for the winter heating program that spans its vast northern provinces from mid-November through mid-March the following year.
“There has been a tweak to the coal-to-gas policy this year that advocates more flexibility in using coal or gas … that has had a fairly large impact on gas demand considering the price factor,” Meng told the seminar.
For all of this year, the coal-to-gas switch is expected to add 17 bcm in gas consumption, comprising 12 bcm from industrial users and 5 bcm from the residential sector, Li said.
PetroChina, China’s top natural gas producer and supplier, expects gas demand from its customers to reach 94.5 bcm this winter, 7% more than last winter, a pace also slowing compared to 8.8% a year earlier.
The scale-back was reflected in trade data released on Friday. China’s imports of natural gas – including pipeline supplies and liquefied natural gas in tankers – fell for the first time in nearly three years, though part of that pullback was caused by an outage at a receiving terminal.
With the world’s second-largest economy growing at its slowest in nearly 30 years, government agencies have stressed in recent months that coal conversions are for both electricity and natural gas depending on availability and economics.
Beijing is also strongly promoting ultra-low emission, or so-called “clean coal”, technology that has been applied to nearly 80% of the country’s thermal power generators.
At Friday’s seminar organized by Chongqing Oil and Gas Exchange, an expert from a Ministry of Ecology and Environment think tank said there was uncertainty over whether subsidies would be extended beyond 2020, which could further cool the gasification push.
The central government paid 35 billion yuan ($5 billion) in subsidies between 2017 and 2019, said Feng Xiangzhao, deputy director at the Policy Research Center for Environment and Ecology.
Reporting by Muyu Xu in Beijing and Chen Aizhu in Singapore; Editing by Muralikumar Anantharaman, Tom Hogue and Dale Hudson