LNG& Natural Gas: Three highlights highlight the strong correlation between the two

Second, the cost of pipeline gas source is strongly related to the price of LNG plant

The supply sources of the domestic LNG market mainly include the export of LNG in the receiving station and the self-production of LNG plants. Among them, the shipment price of LNG in the receiving station is subject to the influence of the comprehensive import and landing price of LNG, which is closely related to the import factor. LNG plants are important direct non-resident downstream users of domestic pipeline gas, and the cost of raw gas determines the production cost of LNG plants, so the impact on the LNG shipment price of plants and even the overall price level of domestic LNG is beyond doubt. At the same time, from the perspective of determining the price of gas source, we should also see the important reaction of LNG market to the price of pipeline gas source. Rather than the change of pipeline gas source price affecting the price trend of LNG market, it is better to say that there is a close relationship between the two.

At present, the gas source price adjustment mechanism of domestic LNG plants can be basically divided into two categories, one is the online auction organized by the upstream gas source on a regular basis, and the other is the gas source enterprises directly specify the range of raw gas price changes.

First of all, in terms of the way that upstream gas sources regularly organize online auction, the gas source enterprises usually specify the starting price and the bidding volume, and then the users of each LNG plant participate in the bidding, and finally produce the actual transaction volume and the actual transaction price. Taking Northwest China and other places as an example, on the one hand, the determination of the starting price level will often pay attention to the trend of the domestic LNG market or even the status quo of LNG spot imports, so its changes reflect the recent changes in the LNG market to a certain extent. On the other hand, bidding, which determines the price of raw material gas and gas source in factories through competition, can itself reflect the supply situation of pipeline gas market. In the case of loose supply and demand of pipeline gas market, bidding gas is abundant, and more bidding will be converted into listing and bidding. The real bidding auction model is more suitable for the tight supply of the market period, the recent raw gas auction volume compared with the same period last year reached more than 60% reduction, the final actual transaction price of the auction continues to remain high, LNG plants and other market participants generally reflect that this year's plan compared with previous years there is indeed a gap. All aspects of plant gas supply changes reflect the recent tight balance between supply and demand in the pipeline gas market, and also directly determine the supply changes in the LNG market.

Secondly, in addition to online bidding, there are still most regional factory gas prices are directly adjusted by the gas source enterprises, although the specific adjustment mechanism varies from place to place, but there are generally no more than two types. One is to regularly adjust the next rise and fall of raw gas prices according to the recent volatility trend of LNG market prices. Under this adjustment mechanism, the changes in LNG prices are projected to the price level of pipeline gas directly supplied to factory gas sources in a timely manner. This pricing model is mainly concentrated in Shanxi Province. The other is to flexibly adjust according to the LNG market situation on the basis of distinguishing the off-peak season. In winter, the demand for pipeline gas heating is strong, the supply pressure of raw gas in LNG plants is large, and the price usually rises. In the off-season phase of pipeline gas consumption, the supply pressure of pipeline gas is small and the supply of gas source is abundant will also cause the price of factory gas source to fall. Therefore, the seasonal characteristics of factory gas price based on this adjustment mechanism also reflect the supply and demand changes of pipeline gas market, or even the whole natural gas market.

At present, although the price of the domestic natural gas market continues to be high, the market-oriented reform process of the pipeline gas market has been significantly accelerated, and the way is often a reverse reference to the price trend of the domestic LNG market. The main gas sources of LNG plants in China are mainly in the northwest, southwest, Shanxi, Henan and other regions. The gas source costs of LNG plants in the northwest are mainly based on the trading center auction mode, and the gas source prices of some plants in the southwest are also directly linked to the fluctuations of the northwest auction prices. The promotion of auction mode makes the release of auction volume and the level of auction price become a strong support for the strong correlation between pipeline gas and LNG market. At present, not only is the LNG market strongly related to LNG gas sources, but non-resident retail prices of urban gas in many areas of the industry have also begun to try to partly link LNG prices.