Chinese Gas Demand Growth Below 5% in 2015

Natural gas consumption growth in China in 2015 fell below 5 percent, an indication of a slowdown in energy demand and an overall deceleration in economic activity.

According to latest BP Statistical Review of World Energy, last year, China consumed 197.3 bcm of gas, up 4.7 percent on year. Asia’s biggest energy consumer saw average natural gas demand growth in double digits during the past decade.

Slowdown in Chinese gas demand has also impacted global consumption. World natural gas consumption grew by 1.7 percent in 2015, a significant increase from the very weak growth (+0.6 percent) seen in 2014 but still below the 10-year average of 2.3 percent, the report stated.

Growth figures in other major consumers in Asia Pacific were mixed. According to the report, Japan and South Korea saw sharp drop in gas consumption last year. Japan consumed 113.4 bcm of gas in 2015, a year-on-year drop of 3.9 percent while South Korean consumption stood at 43.6 bcm, down 8.7 percent compared with 2014 figures.

India consumed 50 bcm of gas last year, almost same as what it consumed in 2014. Pakistan’s gas consumption in 2015 was 43.4 bcm, a growth of 3.5 percent.

However, both India and Pakistan are likely to see robust demand growth in 2016 as global LNG prices remain low. Earlier this week Platts reported that Qatar’s LNG exports to India and Pakistan in the first half of this year jumped almost 50 percent on year. Qatar is the biggest supplier of LNG to these countries.

Exports to India and Pakistan (South Asia) were 7,138,785 mt during January-June, up 46 percent in comparison with the first six months of last year. Rise in deliveries were split between India and Pakistan at 6,045,886 mt and 1,092,899 mt respectively for the first six months of 2016, Platts reported.

India’s cost of importing LNG has dropped sharply this year after New Delhi signed a revised long term contract with Doha. Qatar is largest supplier of LNG to India. Given the backdrop of low global LNG prices, Petronet LNG insisted on renegotiating its long term contract with RasGas. In December, the two parties signed a revised deal. The revised formula bases the price on a three-month average figure of Brent crude oil, replacing a five-year average of a basket of crude imported by Japan, with a rider that Petronet buys an additional 1 mt of LNG annually. Qatar also waived off a $1.5 billion penalty against India for lifting less gas than agreed.

Cost of LNG that India imports from Qatar has slipped below $5 per mmBtu post signing of revised long-term deal.

Earlier this year, Pakistan signed its first long term deal with Qatar. As per the deal signed in February, Qatargas will supply fuel to Pakistan State Oil (PSO) from 2016-2031. The price for each LNG cargo in a particular month has been agreed at 13.37 percent of Brent where Brent value is average of the preceding three months. Qatargas will supply 3.75 mt per annum (MTPA) of LNG to PSO. The 15-year long term deal is the largest deal of first quarter 2016, a report by GlobalData suggests. The deal has been estimated to be worth $16 billion.

Last month, Pakistani private sector company Global Energy Infrastructure Limited also inked a long term deal with Qatargas. As per the sale-purchase deal signed between the parties, Qatargas will supply 1.3 million tonne per annum of LNG to Pakistan for 20 years, with provisions allowing the volume to increase to 2.3 million tonne per annum.