The trade pattern is reconstructed, and the natural gas price center is rising

The length of urban natural gas pipelines in our country is growing rapidly with a steady growth trend. In 2020, the length of China's natural gas urban pipelines will be 850,600 kilometers, an increase of 10.76%. From 2010 to 2020, the length of China's natural gas urban pipelines increased from 256,400 kilometers to 594,100 kilometers to 850,600 kilometers, an increase of more than twice, and the year-on-year growth rate in the decade was more than 10%, and the growth trend was stable. With the popularization of natural gas use in China and the advancement of pipeline projects, the length of natural gas pipelines in Chinese cities continues to increase.

Four major pipelines support China's natural gas imports. China's four major domestic and foreign natural gas pipelines are China-Central Asia Natural Gas Pipeline A/B/C line, China-Central Asia Natural Gas Pipeline D line, China-Myanmar natural gas pipeline and China-Russia East Route natural gas pipeline. Among them, the China-Central Asia A/B/C Line and the China-Myanmar natural gas pipeline have been put into operation, with a total designed transmission capacity of 67 billion cubic meters/year, the China-Russia Eastern Route natural gas pipeline has been put into operation, and the China-Central Asia natural gas Pipeline Line D is under construction, with a designed pipeline transmission capacity of 38 billion cubic meters/year and 30 billion cubic meters/year, respectively. China's four major natural gas import and export pipelines connect Russia, Kazakhstan, Myanmar and Kyaukpyu Port, it is expected that after the completion of the four pipelines, the maximum annual gas transmission capacity will reach 135 billion cubic meters/year, and the pipeline transportation capacity will continue to improve.

2. Tight supply due to the conflict between Russia and Ukraine may continue to support high gas prices

2.1. Europe is highly dependent on natural gas imports, with half of its pipeline gas coming from Russia

Pipeline gas imports are the largest source of natural gas in Europe, and self-produced gas ranks second, with imported LNG playing a complementary role. From the perspective of Europe's natural gas supply pattern, the main supply side includes self-produced, imported LNG, and imported pipeline gas. According to BP data, pipeline gas imports (outside Europe) will be the largest source of gas in Europe in 2021, contributing 232.7 billion cubic meters of gas volume, accounting for 42% of total gas supply. The volume of self-produced natural gas and imported LNG was 210.5 billion cubic meters and 107.2 billion cubic meters, accounting for 38% and 19% respectively.

2.1.1. Self-production: The North Sea gas field has limited resources, and Norway is the main self-producing country

Europe's natural gas reserves are relatively scarce and its resources are limited. Europe has one of the lowest proven reserves of natural gas in the world. According to BP Energy Yearbook data, as of the end of 2020, Europe's proven natural gas reserves of 3.2 trillion cubic meters, accounting for only 1.7% of the global total. In 2020, Europe's reserves/production ratio is only 14.5, far lower than the global average of 48.8, and Europe's natural gas reserves are relatively scarce, the potential for capacity increase is weak, and the recoverable life is low.

North Sea gas fields are the main source of natural gas in Europe. North Sea gas fields are the main source of natural gas in Europe. The North Sea is a marginal sea located in the northeast Atlantic Ocean. It contains oil and gas resources under the sea and is shared by five countries: Britain, the Netherlands, Germany, Denmark and Norway. The North Sea gas fields are concentrated in the waters of Norway, the United Kingdom and the Netherlands, including the Groningen gas field.

European natural gas production has declined in recent years, with Norway, the Netherlands and the United Kingdom accounting for 78% of total production. In 2021, European natural gas production was 210.5 billion cubic meters, down 3.79% year-on-year, with a large decline, mainly due to the unconventional shutdown of North Sea gas fields for maintenance. European natural gas production has been on a downward trend since 2011, from 284.8 billion cubic meters in 2010 to 210.5 billion cubic meters in 2021. By region, Norway, the Netherlands and the United Kingdom are the main gas producers in Europe. In 2021, Norway, the Netherlands and the United Kingdom accounted for 54.3%, 8.6% and 15.5% of production, respectively. Norway contributes a large amount of production and keeps the production relatively stable; Dutch production continues to shrink.

2.1.2. Imports: The United States and Qatar are the main importers of LNG, and Russia is the main importer of pipeline gas

Europe's LNG imports mainly come from the United States, Qatar, Russia, Algeria and Nigeria. In terms of LNG imports, according to BP data, Europe's LNG imports in 2021 will be 108.2 billion cubic meters, mainly from the United States, the Middle East, Russia, North Africa and other places. In 2021, the United States will be the largest importer of LNG in Europe, with Europe importing 30.8 billion cubic meters of LNG from the United States, accounting for 28.5% of total imports. In 2021, Europe will import 22.5 billion cubic meters from Qatar, 17.4 billion cubic meters from Russia and 15.4 billion cubic meters from Algeria, accounting for 20.8%, 16.1% and 14.2% of total imports, respectively.