Gas demand growth in China fell from 9.4% in 2014 to 2.7% in 2015, rapidly turning its supply-constrained market to an oversupplied one. Faced with flagging gas demand, and to catch up with the drop in oil and international prices, the government has cut gas prices in an attempt to stimulate demand. A series of factors contributed to China’s drastic fall in gas demand: the country’s slowing economic growth, the structural shift away from heavy industries, competition from hydro and nuclear and rising domestic gas prices amid declining oil and coal prices. Despite experiencing a gas supply bubble, local gas supply constraints still occurred during last winter, when in December Beijing introduced gas supply rationing following a red alert announcement for air pollution. A series of energy market reforms which are at various stages of implementation are continuing to impact China’s oversupplied and fragmented gas market. This article looks at these reforms and their effects on the outlook for LNG demand.
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