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China's Intense Appetite for Natural Gas

The Chinese economy continues to pile up more record breaking headlines on overall growth figures and forecasts across several of its industries. The country will need to import ever increasing quantities of natural gas to feed its economic growth centers.  With readers accustomed to Chinese domination in solar panel manufacturing often backed through government subsidies the story is spreading to the natural gas arena.  40% of global annual gas demand over the next five years, according to an International Energy Agency report, will also come from the world’s most populous nation.

The insatiable appetite for natural gas will not be quenched immediately.  But plans to build a “string of LNG import facilities” according to Bloomberg, stimulated by government efforts to promote gas and “encourage competition” are a smart step in the right direction. One of the other key drivers of the natural gas boom are the attractive prices of the commodity on the spot market. Also having your own import and distribution facilities will help the Chinese take advantage of current market prices.

 The landscape of energy firms in the country include “state majors” which own and operate 12 gas import facilities who buy gas under long-term contracts. But it is the independent companies that are able to leverage better spot prices. Some of the demand will also be fulfilled by the U.S. companies from an announcement in May as part of the 100-Day action plan of the comprehensive Economic Dialogue, where American companies will bid for supplying liquefied natural gas contracts. Those involved in the production and sales of this intensely valuable commodity will have their hands full into the forseeable future.

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