China’s largest natural gas supplier, China National Petroleum Corporation (CNPC), will largely maintain contracted gas prices this year in order to ease the impact of rising global energy prices—driven by Middle East conflict—on industrial users.
According to Bloomberg, the Chinese consultancy OilChem noted that CNPC will continue to use last year’s price cap, a move also aimed at supporting the long-term development of the domestic natural gas industry.
Due to weaker demand last year, China’s natural gas inventories stand at high levels, providing Beijing with the capacity to cope with potential supply disruptions caused by the current conflict. Although liquefied natural gas (LNG) shipments from Qatar have been suspended due to the conflict, they account for only about 6% of China’s total consumption.
Exchange data shows that spot LNG prices for May delivery to China have risen by about one third this month, to $17.13 (RM67.15) per million British thermal units. However, cheaper onshore natural gas and coal supply have curbed further price hikes. Traders said the spot LNG price in Asia on the 17th was quoted at $19.80 (RM77.62) per million British thermal units.
In recent years, China has continued to advance market-oriented reforms in the natural gas sector, allowing suppliers to pass on some costs to consumers, while seeking to avoid large price fluctuations that could impact the economy.
As oil demand is peaking, domestic producers are expected to ramp up natural gas output. Last week at a summit in Beijing, CNPC Senior Researcher Dai Jiaquan said this move would help buffer the effects of global geopolitical and energy market turmoil.