China moves to secure natural gas supply amid rising winter demand

BEIJING - China's top economic planner has coordinated major natural gas suppliers to secure supply and stabilize prices to cope with rising demand in northern China.

Companies should keep natural gas prices basically stable and ensure adequate supplies, Xinhua-run Economic Information Daily quoted a notice from the National Development and Reform Commission (NDRC).

The move followed a surge in natural gas demand in northern China as millions of households shift from burning coal to using gas for heating in winter to help combat air pollution.

Liquefied natural gas (LNG) consumption has witnessed sharp growth this year with consumption reaching 167.6 billion cubic meters during the January-September period, up 16.6 percent year-on-year. Full-year growth in 2016 was 7 percent, NDRC data showed.

Consumption is expected to reach 230 billion cubic meters this year with 20 billion cubic meters coming from the coal-to-gas transition, said Xu Bo, senior analyst with China National Petroleum Corporation's (CNPC) Economics and Technology Research Institute.

The growing appetite for gas has pushed domestic LNG prices to a record high of 9,000 yuan ($1,361) a ton on Dec 1 in some regions, according to an industry report.

To secure gas supply, China's State-owned oil firms, including CNPC and China National Offshore Oil Corporation (CNOOC), are maximizing production at domestic gas fields and the NDRC has urged companies to be self-disciplined in pricing.

The ultimate solution lies in encouraging competitiveness of companies and improving infrastructure construction, said Jing Chunmei, a researcher with China Center for International Economic Exchanges.

"More social capital should be encouraged in the creation or expansion of infrastructure like pipelines, ports with suitable terminals, storage facilities and transportation networks to lower costs and form a market-based pricing mechanism," said Jing.