NDRC Urges Local Governments to Stabilize LNG Supply in Winter

Under Beijing’s ambitious coal-to-gas campaign, the northern China enjoyed a “blue sky” in this winter, while residents in this region also suffered the gas supply deficit at the same time. A huge amount of natural gas available was taken into the pipeline network as requisition, leaving LNG plants, LNG refilling stations and P2P suppliers in shortage. At the meantime, LNG terminals in northern China also increased gasification rate to contribute more supplemental gas, further exacerbating the shortage of available in the market. Even though, the gas supply for resident heating is still far from abundant. According to sources, the gap between supply and demand of residential gas in Hebei Province was assessed at around 20%, and it was likely to worsen, considering the current tightening supply circumstances.

According to SCI, the delivered spot LNG prices in several northern China regional markets has doubled from two weeks ago, and it is very likely to break through the threshold of RMB 10,000/mt soon in early December.

In view of this, NDRC issues a formal circular on December 1, 2017 and urges local governments to stabilize the LNG supply and prevent price from unusual fluctuations, so as to guarantee the LNG supply to stay above the critical level in the peak season, especially when the requisition is happening.

NDRC requests all its local subordinates to hold meetings to warn all the LNG plants (mostly in Shaanxi, Inner Mongolia, Ningxia, Xinjiang, Shanxi and Sichuan); terminals (especially the terminals in Qingdao, Dalian, Rudong and Tangshan); marketers related to production, transportation, storage, distribution and sales of LNG; and all LNG associations and service companies related to LNG industry.

As predicted by SCI, the unusual LNG price surge not only shocks market participants, but also has attracted the attention of the government. NDRC’s move will cool the LNG market down by some extent, while the imported resources in South China will soon flow into northern China chasing the arbitrage from the huge price spread between the two regions. Therefore, it is foreseeable the hiking LNG price will face its ceiling soon, but the downswing possibility is still an iota for now in this peaking season for winter heating.