China faces gas oversupply through 2017

China

BEIJING, June 10, 2015 – According to a report from Scottish consultancy group Wood Mackenzie, China is facing weaker demand and an oversupply of gas until 2017. The company forecasts demand in 2020 and 2030 to reach 360 bcm (12.7 tcf) and 560 bcm (19.8 tcf), respectively. This figure is 13 percent lower than previous forecasts of 420 bcm (14.8 tcf) and 640 bcm (22.6 tcf).

“Short-term drivers [of low demand] include low oil prices and high domestic gas prices, reversal of environmental policies, competition from coal and hydro and warmer winter weather. Structural factors include the switch from industrial production to the service sector as a driver of economic growth,” said Wood Mackenzie’s principal gas consultant, Gavin Thompson.

From now until 2017, the company expects an oversupply of nearly 18 bcm (636 bcf) resulting from the fall in gas demand along with increased LNG contracts.

Chinese national oil companies are renegotiating ramp-up schedules and pricing terms, as well as reselling gas into the Pacific market in an effort to reduce volumes.

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