Chinese Gas Companies Ready for Winter Demand Despite Record Cold

Despite record low temperatures in China, the country's gas companies say they expect to be able to cope with increased winter gas demand in the coming weeks.

Sinopec said Tuesday on its website that it had been implementing several measures to combat the extreme temperatures and ensure production at its domestic fields remains stable. The company had already increased its natural gas supplies by around 20% year-on-year in mid-November, with daily gas production exceeding 1.52 Bcf/day.

Its rival PetroChina has been buying spot LNG cargoes to supplement domestic production, sources said.

This comes after its parent China National Petroleum Corp. said in late December that it was likely to import 400 million cubic meters of spot LNG in the first quarter to meet additional winter demand.

China is entering the coldest period of the year and temperatures since end November have been the lowest in 28 years, averaging minus 3.8 degrees Celsius, according to the China Meteorological Administration.

In northeastern China, temperatures were minus 15.3 C, the lowest in 43 years, the department said Sunday.

It added that south China will continue to see severe rainfall in the coming weeks, while some areas will be hit by ice and rain.

An increasing number of major cities in the north are switching from other fuels to natural gas for winter heating, which will likely boost demand as well, according to Beijing-based energy consultancy 3E.

The consultancy is forecasting gas demand in China to rise 14% year-on-year in January to 17.6 Bcf/day, a record high, it said in a report released Thursday.

Besides securing more LNG, the recent full-commissioning of PetroChina's Second West-East pipeline will likely prompt the company to increase gas pipeline imports from Central Asia, 3E said, adding that the pipeline's eight spurs will connect more consumers in Jiangxi, Hunan, Guangdong and Guangxi provinces to the main gas grid.

The government had ordered state companies to ensure that there were sufficient gas supplies in the domestic market, so they were fairly well prepared, said Tony Regan, energy consultant at Tri-Zen in Singapore.

"Supply has been insufficient to meet the winter demand but...PetroChina gave priority to the residential market and cut back supply to the industrial and transport sectors," said Regan.

Private gas distribution companies said Tuesday they had been preparing for the cold weather and have so far not experienced any major gas shortages. "Shortages happen every winter because gas demand generally outstrips supply," said a spokesman with China Gas Holdings.

He said the company has purchased more gas from PetroChina, Sinopec and China National Offshore Oil Corp., but declined to elaborate on sales volumes. "We know that the state companies have increased domestic production and increased the transmission pressure in some of the major pipeline networks," he added.

ENN Energy Holdings says it currently holds eight to 10 days of forward gas supply cover in storage and is prepared to meet additional demand.

"We're also using our liquefaction facilities to transport LNG around if some areas are short of gas," a spokeswoman for the company said.