Gas "natural gas power generation ② : Is natural gas enough? What is the solution to high gas prices?

The supply is sufficient, and more importantly, how can the gas price, the "life gate" of the natural gas power generation industry, fall to a reasonable level?

Can gas be cheaper?

The three major sources of domestic natural gas supply are domestic gas, imported liquefied natural gas (LNG) and imported pipeline gas. In comparison, the import of LNG has the greatest flexibility. Natural gas as a gas fuel is usually supplied by the local city fuel company or direct supply by China National Petroleum, such as Guangdong, a major consumer of imported LNG, gas power plants are mainly supplied by imported LNG.

In the international LNG market, there is known as the "Asian premium". What this reflects is the lack of a say for Asian importers in the international gas pricing system. In 2018, the annual average spot price of Henry Port in the United States was $3.16 /MMBtu (million British thermal units), the average annual price of NBP in the United Kingdom was $8.05 /MMBtu, the average price of LNG imports in Northeast Asia was $9.41 /MMBtu, and the price ratio of the three places in the United States, Europe and Asia was 1:2.5:3.

Liu Manping, a researcher at the Price Monitoring Center of the National Development and Reform Commission, said that the Asian premium appeared, a large part of the reason is the rapid growth of natural gas consumption demand in China, Japan and South Korea, only China produces natural gas in the three countries, but the domestic production growth cannot keep up with the growth of consumption, external dependence continues to rise, and Japan and South Korea are completely dependent on imports.

With the growth of global LNG exporters and exports, the above pattern has loosened, and the Asian premium for natural gas is expected to shrink or even stay flat.

Zhu Xingshan gave the forecast data: During the "14th Five-Year Plan" period, the comprehensive import cost of domestic LNG is 6-7 US dollars /MMBtu, compared with 9-10 US dollars /MMBtu during the "13th Five-Year Plan" period, a significant drop of 30%-50%.

Although the price of imported gas sources has been reduced, the conversion to the final price is still not cheap.

Guo Jiaofeng, a researcher at the Institute of Resources and Environmental Policy at the Development Research Center of The State Council, told Thepaper.cn that the CIF price of imported gas at $6 to $7 per MMBtu will become a long-term trend without considering inflation. Then add the cost of unloading, gasification, pipeline transportation and other costs, and the gas price to the end user will reach about 2.5 yuan/square. That is about the same as the price at which shale gas, the most expensive domestic gas to develop, reaches the end.

In 2020, due to the impact of the COVID-19 pandemic, the collapse of international oil prices and the warm winter, the price of natural gas in the three major markets fell further, hitting a record low. From January to June last year, the average spot price of LNG in the United States HH, the Netherlands TTF and Northeast Asia was $1.81 /MMBtu, $2.48 /MMBtu and $3.72 /MMBtu, respectively, down 33.7%, 52.4% and 46.4% year-on-year.

In the face of the "pay or not" long agreement signed earlier, which costs a decade or two and has high default costs, even if the spot has fallen to the "cabbage price", it is not like to buy.

During the "Twelfth Five-Year Plan" period of high oil prices, domestic oil companies signed a number of high price long trade agreements linked to oil prices, which is still a pain point for the development of the natural gas industry. After the collapse of oil prices in 2014, the pace of signing the "three barrels of oil" long-term agreement slowed down. In 2015, when Asian LNG spot prices fell below $7 /MMBtu, Zhang Guobao, former director of the National Energy Administration, expressed concern that he did not know how the "three barrels of oil" would absorb the long-term contract price as high as $18-20 /MMBtu.

The spot price of LNG is highly flexible, mainly determined by supply and demand, and has no direct correlation with oil prices. At present, China's import of LNG is mainly based on medium - and long-term contracts. Data from the China Natural Gas Development Report (2020), written by the Department of Petroleum and Natural Gas of the National Energy Administration and other departments, show that in 2019, China imported 96.56 million tons of natural gas (equivalent to 135.2 billion cubic meters), pipeline gas imports accounted for 37.6% and LNG imports accounted for 62.4%. Among them, the proportion of spot LNG further increased, accounting for 35.4% of the total LNG imports.

As the world economy gradually emerges from the shadow of the epidemic and commodity prices soar, international oil and natural gas prices have rebounded sharply since 2021.

A senior industry insider familiar with LNG trade told the Surging news that the long association of LNG and oil prices are linked, and the advantages are apparent when the oil price is low. Under the situation of loose supply and demand in the natural gas market, today's long-term association contract terms are more flexible and pricing methods are more diversified, and domestic enterprises tend to negotiate long-term contract procurement with international resources.