Analysis and prospect of domestic natural gas market in 2023



Operation characteristics of domestic natural gas market in the first half of the year

The recovery of natural gas consumption has obvious structural recovery characteristics. With the recovery of domestic production and life order, the recovery of macroeconomic growth, especially the sharp rebound in the growth rate of consumption and service industry, combined with the decline in gas prices and insufficient hydropower output, driving the growth of gas demand for industry and commerce, transportation and power generation, but the overall economic recovery is slower than expected, restricting the growth rate of natural gas consumption, and the structural recovery features are obvious. From January to July, China's apparent consumption of natural gas was 224.5 billion cubic meters, up 6.5 percent year on year, reaching 13.6 billion cubic meters. Actual consumption was 219.8 billion cubic meters, up 6.1% year-on-year to 11.9 billion cubic meters. In the first and second quarters, the actual consumption of natural gas in the country increased by 1.5% and 10.1% year-on-year, and the growth rate in the second quarter was significantly accelerated mainly because of the low base effect caused by the epidemic restrictions in many parts of the country in the same period last year (decreased by 8.6% year-on-year in the second quarter of 2022). In terms of structure, after the adjustment of epidemic prevention and control policies, the consumption scene has improved, and the recovery of commercial services and transportation gas has been faster; Affected by weak demand recovery, slowing exports, and high inventories of finished goods, industrial growth is weak, especially the decline in real estate investment, which partially weakens the favorable aspects such as the concentrated release of market demand after the adjustment of the epidemic prevention and control policy and the drop in fuel prices. Economic recovery and extreme hot weather have made peak electricity and peak load reach new highs, superimposed hydropower output is insufficient, gas-fired power generation and other types of units can complement each other, jointly ensuring the safe and stable supply of energy and power. The chemical market fluctuates greatly, and the performance of gas is flat.

The supply of natural gas is generally sufficient and the market price is on a downward trend. The import price of foreign natural gas remains high, and the enthusiasm of domestic natural gas production is high. From January to July, the country produced 135.4 billion cubic meters of natural gas, an increase of 5.8 percent year-on-year. Affected by the short supply of Central Asian import sources, domestic pipeline natural gas imports in the heating season decreased year-on-year, including Uzbekistan completely stopped supply and Kazakhstan significantly reduced sources from January to March; The supply of the eastern route between China and Russia has steadily increased. From January to July, imported pipeline natural gas was 38.1 billion cubic meters, an increase of 5.1% year-on-year. Some of the previously signed LNG import contracts began to be implemented, and spot LNG imports remained sluggish. From January to July, LNG imports totaled 54.2 billion cubic meters, up 9.5% year on year. From January to March, the country's gas storage facilities produced 9.24 billion cubic meters of gas, an increase of 2.2% year-on-year; From April to July, the cumulative gas injection was 13.9 billion cubic meters, an increase of 15.8%. Affected by the lack of market demand, domestic natural gas prices have generally shown a downward trend this year. From January to July, the national LNG ex-factory price index averaged 5089 yuan/ton, down 1845 yuan/ton year-on-year; Domestic pipeline gas prices have also gradually declined after entering the non-heating season.

Analysis of domestic natural gas market situation in the second half year and this winter and next spring

The economic recovery has formed a stable support for the recovery of the natural gas market, and the impact of climate change is the key. In terms of macro economy, the trend of domestic policy in the second half of the year is to maintain a certain policy tension under the tone of "prudent", and still adhere to structural policies. It is expected that the domestic GDP growth rate will be about 5% in 2023, and the economic recovery will support the continued recovery of the natural gas market, but the problems such as weak exports, insufficient social consumption, and the real estate downturn will still play a structural inhibitory role in the demand for natural gas. In terms of climate, El Nino makes the winter more likely to be warm, or to suppress heating demand, but the uncertainty is greater. In terms of energy substitution, the recovery of the coal market has a certain impact on the recovery of natural gas consumption, which is reflected in different degrees in the electricity, building materials, chemical and other industries. In terms of price, the decline in corporate profits has directly led to an increase in sensitivity to costs. Since the beginning of this year, although the international natural gas prices have generally shown a downward trend, they are still higher than in previous years, and the enthusiasm for downstream gas use is weak, and the market's incremental gas demand is very limited. However, coal power enterprises continue to lose money, leading to the rise of equipment risks caused by insufficient investment in technical reform and maintenance, increasing the uncertainty of coal power production and supply, the key moment can quickly play a role in the main gas power. Comprehensive forecast for the second half of the domestic natural gas demand of about 192 billion cubic meters, an increase of about 8%. With the end of the "seven down and eight up" peak summer critical period, the production season and heating season are coming one after another, and industrial and urban gas is expected to alternately replace power generation to promote the recovery of natural gas demand. It is estimated that domestic natural gas demand in the third quarter is about 87.5 billion cubic meters, an increase of 8.5% year-on-year. In the heating season, there is a greater possibility of warm winter in China, and many places have successively started the upstream and downstream linkage mechanism of natural gas prices, and the price of residential gas has risen significantly, which may have a certain impact on the heating gas consumption. Under the normal winter temperature scenario, it is expected that domestic natural gas demand in the fourth quarter is about 106 billion cubic meters, an increase of 8.9%, and domestic natural gas demand in the heating season is about 191 billion cubic meters, an increase of 7.8%. In the case of significantly warmer winter temperatures, it is expected that domestic natural gas demand in the fourth quarter is about 104 billion cubic meters, an increase of 6.8%, and domestic natural gas demand in the heating season is about 187 billion cubic meters, an increase of 5.5%.

Natural gas supplies are generally adequate, and spot LNG gaps are limited. Foreign natural gas import prices continue to be high, domestic natural gas production to maintain the momentum of production, is expected to 2023 annual domestic natural gas production of about 232 billion cubic meters, an increase of 5.4%. The Central Asian pipeline gas exporting countries and China's Xinjiang, Inner Mongolia and other places have similar latitudes, as the weather turns cold, the demand for natural gas will gradually increase, or have an adverse impact on pipeline gas exports. Under the conditions of insufficient driving force for substantial growth of domestic natural gas demand, continuous growth of domestic gas, increased supply from China and Russia on the Eastern route, and the implementation of the long-term agreement on new LNG imports, the LNG spot gap is limited.

Gas prices will rise seasonally in the heating season, and the overall trend in the second half of the year is "first low and then high". According to the analysis of the current supply and demand forecast results, it is expected that the national natural gas supply and demand in the second half of the year is basically balanced, and the spot LNG demand may be less than the same period last year. In the heating season, the seasonal adjustment of various gas storage facilities, production, import and other links can basically guarantee the demand for gas, and the shortage of supply and demand is mainly short-term. It is expected that the average price of LNG in the country from August to October is 3900 to 4200 yuan per ton; Into the heating season gas prices rise seasonally, the national LNG factory average price is 4,700 to 5,000 yuan per ton.