Slower than expected gas demand growth in China could put more pressure on LNG suppliers that are already trying to survive high costs amid an industrywide downturn marked by lower crude prices.
This comes as 2015 is expected to bring growth in LNG supplies, according to a report released by the Wood Mackenzie consultancy that highlighted certain areas to watch this year.
“From 2015, LNG markets face rapid supply growth, led by Australia and followed into 2016 by the U.S., from the Gulf Coast,” Noel Tomnay, head of global gas and LNG for Wood Mackenzie, said in the report. “Suppliers will be looking closely at Asia’s gas demand growth.”
This raises some concerns considering gas demand in China—the world’s most populous country—grew slower than anticipated in 2014. The report stated that China’s natural gas demand was expected to increase 17% over the 2013 level; however, demand grew less than 10% year-over-year.
The EIA projects gas demand in China, which is ranked as the third-largest LNG importer, will rise to 221 billion cubic meters (Bcm), equal to 7.8 Tcf, in 2020 before skyrocketing to about 481 Bcm (17 Tcf) by 2040.
In addition to efforts to tap its own gas resources, the country has turned to Russia—among others—to help meet its gas needs. In November, China and Russia sealed a $400 billion gas deal. As part of the agreement, Russia’s Gazprom will supply 30 Bcm (1 Tcf) of gas annually from Western Siberia. The agreement followed one signed in May when Gazprom and China National Petroleum Corp. signed a 30-year contract for 38 Bcm (1.3 Tcf) of gas annually.
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