China Natural Gas Price Cuts Seen Luring Customers From Coalby
Gas sales by ENN seen rising 15% as lower prices spur demand
ENN sees LNG sales rising to 2 bcm; purchases up to 4 bcm
China’s natural gas demand has been boosted by price cuts aimed at switching users from coal to the cleaner-burning fuel, according to one of the country’s biggest gas distributors.
ENN Energy Holdings Ltd. has seen its sales rise more than 15 percent in January and February as lower prices encouraged customers to switch, Vice Chairman Cheung Yip Sang said in an interview in Hong Kong. ENN expects full-year sales to rise 15 percent, following last year’s 11.5 percent jump to 11.3 billion cubic meters.
“The movement really picked up a lot of momentum,” Cheung said. “The higher burning efficiency of gas and government pressure for better emission standards will help convert more industrial users from coal to gas.”
President Xi Jinping’s government adjusted gas prices twice last year to stimulate demand and shift consumption from coal, which makes up 64 percent of the country’s energy mix. The share of natural gas may rise from its current 6 percent, the company said last week, adding that users switching from coal made up 39 percent of new commercial and industrial customers last year.
China’s gas demand expanded 3.3 percent in 2015, while coal consumption dropped 3.7 percent, declining a second year, according to the National Bureau of Statistics. Coal use will slip further this year amid tepid demand from industrial users, according to the China Coal Industry Association.
The country’s LNG imports in the first two months of 2015 jumped more than 14 percent and shipments by pipeline rose 15 percent to a record. That “may reflect gas companies’ confidence in future demand following the government’s recent cut in wholesale prices,” Charles Shum, a Bloomberg Intelligence analyst, wrote last week. “The key driver of demand will be use of the fuel as a substitute for coal.”
The gains by natural gas may be limited, Cheung cautioned, as it’s unlikely China will lower prices further because they’re already cutting in to earnings by state-owned producers.
ENN expects to sell at least 2 billion cubic meters of liquefied natural gas within China this year, up from 1.2 billion in 2015, Cheung said. It’s total LNG needs this year, including gas supplied to its own pipeline-distribution unit, may rise to 4 billion cubic meters (roughly 2.84 million tons), which it delivers by truck or injects into pipelines to supply businesses and homes.
ENN, with connections to more than 12 million households. has grown by exploiting the gaps in service by China’s state-own giants, which control most of the pipelines distributing the fuel and dominate piped and LNG imports. The country bought 19.6 million tons of LNG last year, down 1 percent.