Jonathan Fenby

Chairman, China team and Managing Director, European Political Research
+44 20 7246 7880

Featured China research

China Global: Trump and Xi see off the storm – for the moment China Global: Trump and Xi see off the storm – for the moment, Jonathan Fenby, 10 Feb 2017

Recent China research

* China Watch: Strong global growth a tailwind for China's deleveraging, Michelle Lam, Trey McArver, Larry Brainard, 14 Dec 2017
* China Watch: Outlook for 2018, Larry Brainard, Trey McArver, Michelle Lam, 7 Dec 2017
* China Perspective: North Korea scores, US stuck, Jonathan Fenby, 1 Dec 2017

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Recent blog posts

Gas-to-gas competition emerging in China Gas-to-gas competition emerging in China, Stephen O'Sullivan, 17 Aug 2017
Chinese gas import dependency continues to increase Chinese gas import dependency continues to increase, Stephen O'Sullivan, 25 Jul 2017
China gas reform has not gone far enough China gas reform has not gone far enough, Stephen O'Sullivan, 18 Jul 2017
China’s gas reform – not as far or as fast as we had hoped China’s gas reform – not as far or as fast as we had hoped, Stephen O'Sullivan, 5 Jul 2017

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Chinese gas in 2016: Better outcomes than expected

Official statistics for 2016 just released by China’s National Development and Reform Commission show that the Chinese gas sector outperformed expectations last year across all fronts.

Gas consumption rose by 6.6 per cent in 2016 compared with 2015, which in turn was an increase over the 2015 growth rate of 5.7 per cent. Demand last year was 205.8 bcm – just slightly above of the government’s target of 205 bcm. CNPC has forecast 2017 demand at 216 bcm, a 5 per cent increase, which does not seem unreasonable.

Gas production rose, too, last year, albeit less than demand – up just 1.5 per cent to 137.1 bcm and slightly above the recent National Bureau of Statistics estimate. This was not an unexpected outturn, given the figures for recent years. CNPC has forecast very little growth in production again this year – just 138 bcm in what is a reflection of relatively low gas prices in China, which have been suppressing exploration and development activity (although this situation has been changing of late). It also reflects the relatively disappointing outcome of all the efforts put into developing China’s unconventional gas resources – whether shale gas, coal bed methane or coal-to-gas. At the same time, recent price rises in response to cold weather in northern China are likely to dampen demand.

As usual, gas imports took up the slack of demand growing more quickly last year than domestic production in absolute terms. Imports rose 17.4 per cent to 72.1 bcm. CNPC expects imports to increase further this year to some 81 bcm – which is highly likely in view of its relatively downbeat forecast of production in 2017. Pipeline imports are forecast to exceed LNG imports (43 bcm vs 38 bcm), although the latter are expected to grow more strongly this year and close the gap.

Medium-term outlook positive for demand, less so for production

In the medium term, there is no question that Chinese gas demand will increase, driven by environmental concerns encouraging the switching of coal to gas in power generation and industrial uses as well as by the increased use of gas in the transport sector. However, forecasts for 2017 demand are still quite varied – ranging from 210 bcma to 230 bcma, depending on the assumptions made about fuel-switching, pricing and political concern over the environment.

We are less optimistic about growth in domestic output. Both conventional and unconventional gas supplies have grown at a relatively slow pace in recent years, and we expect imports by pipeline and through LNG terminals to continue to fill the gap between supply and demand in China.

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