Global natural gas supply and demand are tightly balanced, and gas prices may remain medium-high

Domestic production has risen steadily in recent years, and declining imports in 2022 constrain demand growth

In terms of domestic production, according to Wind data, China's natural gas production has continued to grow in the past decade, with a CAGR of +7.1% from 2011 to 2022, of which 217.8 billion cubic meters of self-produced gas will be achieved in 2022, up 6.1% year-on-year. In terms of domestic demand, the rising demand for natural gas in China in the past decade has led to the simultaneous growth of imports, and imports and consumption have declined in 2022. According to Wind data, the apparent consumption of domestic natural gas increased rapidly from 107.4 billion cubic meters to 374 billion cubic meters in 2010-2021, with a CAGR of +12.0% in 2010-2021. During the same period, China's natural gas imports rose rapidly, from 16.6 billion cubic meters to 168.7 billion cubic meters. The CAGR for 2010-2021 is +23.5%. Domestic natural gas imports and apparent consumption in 2022 declined, and domestic natural gas imports in 2022 were 151.9 billion cubic meters, down 10.0% year-on-year, and apparent consumption was 363.8 billion cubic meters, down 2.7% year-on-year, maintaining a high overall level.

Structural distribution of domestic natural gas demand

From the perspective of industry distribution, the demand in 2021 mainly comes from the industrial fuel and urban gas industries, accounting for 40% and 32% respectively, which are +1.4pct and -1.9 pct compared with 2018 respectively. Other demand came from the power generation gas and chemical gas sectors, accounting for 18% and 10%, respectively, a change of +0.7pct and -0.2pct compared with 2018. From the perspective of consumption distribution, natural gas consumption in 2021 is mainly concentrated in East China, North China and South China markets, consuming 1062, 743 and 47.9 billion cubic meters of natural gas respectively, accounting for about 29.0%, 20.3% and 13.1% of the total consumption, respectively, with year-on-year changes of +13.3%, 15.2% and 23.8%. The top five consumption provinces in 2021 are Guangdong, Jiangsu, Sichuan, Shandong and Hebei, with a consumption of 364, 314, 268, 237 and 22.8 billion square meters, accounting for 9.8%, 8.4%, 7.2%, 6.4% and 6.1% of the current apparent consumption, respectively.

There are three routes for China's pipeline gas imports, and the transport volume of Central Asia and China-Myanmar pipelines has remained stable in recent years

There are three ways for China to import pipeline gas, namely the Central Asian pipeline line, the China-Myanmar pipeline line and the China-Russia pipeline line: The Central Asia pipeline is transported by four pipeline lines A/B/C/D, of which A/B/C three lines are parallel, starting from Turkmenistan, passing through Uzbekistan and Kazakhstan, and ending in Khorgos, China. The designed transportation capacity is 60 billion square meters/year, and the actual transportation capacity in 2021/2022 is 44/43.2 billion square meters; Central Asia Pipeline gas Line D designed transport capacity of 30 billion square meters/year, is still under construction. The China-Myanmar pipeline, starting from Kyaukpyu Port on Langli Island on the western coast of Myanmar, through Yunnan and Guizhou provinces to Guigang in Guangxi Province of China, has a designed transportation capacity of 12 billion square meters/year, and an actual annual transportation capacity of about 5.2 billion square meters.

Looking forward to the next 2-3 years, global natural gas supply and demand are still tight balance, and gas prices may remain medium and high

Global LNG plant capacity growth in 2023 is limited, with growth concentrated in 2025 and beyond

In 2023, the new capacity of the global LNG liquefaction plant is Greater Tortue Ahmeyim Phase 1 project and Tangguh LNG Train III project, respectively, and the total new liquefaction capacity is expected to be 10.8 billion cubic meters/year, down from 27.6 billion cubic meters/year in 2022. The new capacity of liquefaction plants in the future is mainly concentrated in 2025 and after, of which, the new liquefaction capacity is expected to be about 34.6 billion cubic meters/year in 2024, and the total new liquefaction capacity in 2025 and after will reach 80.7 billion cubic meters/year; By country, the new liquefaction capacity is mainly concentrated in the United States and Russia, in the 2022-2027 period, the new liquefaction capacity of the United States and Russia is about 62 billion cubic meters/year and 21 billion cubic meters/year, respectively.