Analysis and prospect of domestic natural gas market in 2023



Since the beginning of this year, the domestic natural gas market has ushered in a recovery, but due to the slower-than-expected economic recovery and the overall sufficient supply of natural gas, natural gas prices have gradually fallen. In the second half of the year, the uncertainty of domestic natural gas demand comes from macroeconomic, climate, energy alternatives, prices and many other aspects, but the more critical is the impact of El Nino climate and heating season temperature level on demand during the "peak winter" period.

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.

Digital click

In 2022, China's natural gas consumption will be 364.6 billion cubic meters, down 1.2% from the previous year; Natural gas accounted for 8.4% of the total primary energy consumption, down 0.5 percentage points from the previous year.

In terms of consumption structure, the proportion of urban gas consumption increased to 33%; The scale of gas use in industrial fuel, natural gas power generation and chemical industry decreased, accounting for 42%, 17% and 8% respectively.

China's natural gas output was 220.1 billion cubic meters, a year-on-year increase of 6% and an increase of more than 10 billion cubic meters for six consecutive years, of which shale gas output was 24 billion cubic meters. The country's new proved geological reserves remained at the peak of 1,132.3 billion cubic meters.

China imported 150.3 billion cubic meters of natural gas, down 9.9% from the previous year. Among them, pipeline gas imports were 62.7 billion cubic meters, an increase of 7.8% over the previous year; LNG imports were 87.6 billion cubic meters, down 19.5% from the previous year.

Enterprise action

The natural gas branch maintains a good development trend through scientific overall planning

Since the beginning of this year, the Natural gas Branch actively responds to the fierce market competition, closely follows the theme of high-quality development, takes the annual business goal as the main direction, constantly innovates the business strategy, scientifically plans the volume efficiency goal, and promotes the realization of stable operation and efficient development. From January to August, the natural gas Branch accumulated 29.031 billion cubic meters of natural gas, completing 66% of the annual plan, and the main business objectives were successfully achieved, maintaining a good development trend as a whole.

We will continue to consolidate the resource base. Natural Gas Branch in accordance with the "quantity and efficiency, efficiency first" idea, based on domestic and foreign two resources, two markets, manage each cubic meter of natural gas. Proper arrangement of medium - and long-term resource shipping schedule, combined with the actual production and operation of the continuous optimization of LNG ship unloading, while closely monitoring the trend of international LNG import prices, spot resource procurement in advance. Actively participate in LNG international exhibitions, seek opportunities for international business cooperation, and accelerate international business. We will actively coordinate self-produced resources, intensify research on external resources, expand the scale of domestic gas, and continue to optimize the structure of resources. Build and improve the integrated direct supply business model of "petrochemical resources - petrochemical logistics - petrochemical gas stations - end users", and promote the synergistic creation of the whole LNG industry chain.

We will steadily advance key projects. In accordance with the principle of matching resources, facilities and markets, the Natural Gas Branch has continuously optimized the layout of facilities, adjusted the pace of construction of facilities, and accelerated the construction of key projects such as the third phase of Qingdao LNG Terminal and the second phase of Tianjin LNG Terminal. Among them, Qingdao LNG terminal has built China's first 270,000 cubic meters of LNG storage tank, will be put into use before the end of the year, when the station's annual gas supply capacity will be increased to 16.5 billion cubic meters, becoming the country's largest annual transfer capacity of LNG terminal in the same period. The Tianjin LNG Terminal Phase II project will be put into use before the heating season this year, with a total gas storage capacity of 1.08 billion cubic meters, ranking first among the LNG terminals that have been put into operation in China, which can further enhance the regional peak load capacity and ensure the stability and order of the regional natural gas market. In addition, the construction of key projects such as the Longkou LNG project in Yantai, the East Main line of the Shandong Pipeline, and the Northeast Anhui Pipeline has been advanced in an orderly manner.

We will spare no effort to ensure the livelihood of the people. The Natural gas Branch pays close attention to changes in market demand, reasonably optimizes resource allocation, accurately serves user needs, takes "ensuring people's livelihood" as the top priority, and continuously improves natural gas supply capacity. During the peak summer this year, the Natural gas Branch prepared a special supply guarantee plan, constantly adjusted and improved the operation and scheduling mode, fully raised natural gas resources on the basis of the supply guarantee contract, and stored sufficient peak load resources in gas storage and LNG storage tanks in advance. In July, the total supply of 244 million cubic meters of natural gas to direct gas power plant users, an increase of 22% year-on-year, a record high. At the same time, the company did a solid job of emergency peak load balancing, and increased the non-heating season natural gas contract volume by 95 million cubic meters during the "Universiade" in Chengdu to ensure energy use.

Zhongyuan Oilfield adheres to the integrated operation of natural gas to achieve over-planned production

Since the beginning of this year, Zhongyuan Oilfield has adhered to the integration of exploration and development and the integration of geological engineering, actively explored the land phase production position, steadily promoted the adjustment and exploitation of potential in old areas, and achieved efficient and stable operation. From January to August, it has produced 4.697 billion cubic meters of natural gas, exceeding the plan by 164 million cubic meters.

"In view of the bottleneck restricting the high-quality and sustainable development of oil fields, strengthening scientific research and technological innovation is the top priority." Zhongyuan oilfield deputy general manager Li Zhongchao said.

By means of scientific and technological research, Zhongyuan Oilfield has strengthened the fine management of sulfur and water control in the old area, deepened the evaluation potential of the stratified system around it, and made every effort to improve the utilization rate and recovery rate of the gas reservoir. Of the 7 Wells implemented, two Wells have been successfully put into operation, with a daily gas increase of 350,000 cubic meters, which fully confirms the effective way to understand the gas reservoir and excavate the remaining gas in the potential water intrusion area, and has important guiding significance for the next step to accelerate the pilot test of Class III layer and intra hole, and expand the adjustment scale of Class III layer and flooded area.

At the same time, Zhongyuan Oilfield focuses on the countermeasures for the beneficial development of natural gas, establishes a multi-disciplinary and multi-professional joint research model, and makes high-quality research and preparation of block adjustment plans. "Take the Dawan block of Puguang Gas Field as an example. The block has been producing steadily for 12 years, and the production performance is gradually declining, the difference between Wells is large, and the pressure decline trend is accelerating... These indicators mean that the Great Bay block is about to enter a phase of decline." Zhongyuan oil field gas reservoir engineering expert Yu Qikui introduced.

In order to further improve the degree of reserve utilization, extend the stable production period of the Greater Bay Area block, and maintain the stability of Marine production, the Puguang Gas field and the Petroleum Exploration Research Institute jointly worked out two potential exploitation directions, such as controlling the flow field to reduce reserves loss and adjusting the potential exploitation to increase reserves utilization, and completed the adjustment plan. "The overall plan is expected to build an annual capacity of more than 800 million cubic meters, and increase the recovery rate of the gas field by 1.43 percentage points." Yu Qikui said.

In addition, Zhongyuan Oilfield optimized production and operation, adhered to the work tone of "forward-looking thinking, overall planning, and overall promotion", focused on "efficient production construction, operation efficiency improvement, optimization of construction, time rate improvement" and other aspects of the work, continued to improve the coordinated production operation mechanism, and made every effort to improve organizational efficiency, laying a solid foundation for the completion of various production tasks.

In terms of process technology, Zhongyuan Oilfield, in line with the principle of continuously improving the speed of production and construction, focuses on the high-quality and efficient implementation of capacity construction, carries out research on drilling and production cost reduction and speed up, and ensures that safe production is achieved in the shortest time and under the best condition. "In terms of drilling technology," PDC composite bit + high-torque screw "is preferred, and the completion cycle is shortened by more than 5 days on average; In terms of gas production technology, the optimization of drilling and completion processes, using a single string run, equipment localization and string material degradation, etc., reduced the duration by 22% and cost by 34%." Zhongyuan oilfield deputy chief engineer Liu Changsong said.

Southwest oil and gas precision marketing of natural gas to achieve double increase in volume and efficiency

In the face of the complex and changing market situation, Southwest Oil and Gas resolutely implements the decisions and deployments of the group company, highlights the benefit orientation, flexibly develops marketing strategies, and realizes the double increase of natural gas volume and efficiency by continuously expanding resource channels, fully protecting customers' gas use, and improving the gas supply guarantee ability. At present, the company supplies more than 24 million cubic meters of gas per day, and has sold 5.8 billion cubic meters of natural gas this year, up 12% year-on-year.

Southwest oil and gas dynamic optimization of gas source structure, market layout, strengthen stable production and expand the market. Sales management personnel go to the forefront of the market, investigate regional industrial development plans and potential customers, and work closely with the production department to conduct a comprehensive analysis of the production and sales situation, formulate sales scheduling plans month by month, and refine them to each customer, so as to achieve a balance between production and sales.

In order to effectively ensure the smooth export, the company increased market expansion efforts, and coordinated the optimization of enterprise resources allocation in Sichuan, Chongqing, Guizhou and other places; Deepen the "interconnection" with brother enterprises, establish gas source points, pay close attention to the production progress of key production capacity construction projects, tailor sales plans, do a good job in market reserves, and achieve instant production and sales. At the same time, the company has strengthened communication with Chongqing oil and gas trading Center and downstream users, adopted special gas trading, listing, agreement trading and other ways to innovate natural gas online trading mode, and has carried out 24 natural gas online trading this year, with a cumulative transaction of 274 million cubic meters of natural gas.

In order to enhance gas supply capacity, Southwest Oil and Gas has increased exploration and development efforts, launched a special action of "Fighting for five months, springing forward production", focused on production targets, decomposed task indicators, implemented key measures, paid close attention to the high and stable production of the old areas such as the middle and shallow reservoirs in western Sichuan and Yuanba gas field, and accelerated the production of Weirong shale gas field, Heba gas field and other new areas, and prepared enough "grain and grass" for supply.