Turkmen Gas In The Pipeline For 2020

BMI View: We anticipate the greater use of pipeline imports will limit the potential for LNG imports and could impact growth of regasification capacity in China. China's latest natural gas supply deal will see deliveries of pipeline gas from Turkmenistan increase to 65bcm by 2020. Added to this is China is building up growing pipeline supply di versity from Myanmar and Russia.

China's surge to increase the percentage of gas used in the country's primary energy mix has taken another major step forward. According to a recent report, Turkmen President Gurbanguli Berdymukhamedov and President Xi Jinping of China , signed several deals to increase gas supply from the central Asia n country. The agreements outline the supply of up to 65bn cubic metres (bcm) a year of natural gas from Turkmenistan to China by 2020, increasing from an estimated 25bcm in 2013. This is a critical move for China, giving them access to a large volume of competitively priced pipeline gas. Our forecasts anticipate Chinese gas consumption to increase from 171bcm in 2013 to 283bcm by 2020 , with a widening import requirement as domestic gas production growth will be outpaced by demand.

Growing Need For New Gas Supplies
Chinese Gas Production, Consumption and Import Requirement 2010-2020, bcm

Turkmenistan is becoming an increasingly important energy trading partner with China following the completion of the Central Asia-China pipeline , which is expected to reach a capacity of 55bcm a year in 2014. In 2012 , China consumed around 33% of the gas produced in Turkmenistan, however the latest deal will increase this to around 50% by 2020, making the central Asian nation increasingly dependent on Beijing for trade revenues.

On the other side, Turkmenistan provided around 60% of China's gas import needs in 2012 , the re mainder derived from liquefied natural gas ( LNG ) imports , with the second largest gas supplier being Qatar account ing for 19%. The deal to export 65bcm of gas to China by 2020 will maintain Turkmenistan as the country's premier gas supplier over our forecast period , with its s hare of imports remaining around 50- 60% .

China therefore appears to be increasing its pipeline connections with gas suppliers , potentially limiting the speed at which new LNG regasification facilities are built and the market for new LNG supply contracts . The agreement with Turkmenistan will increase pipeline capacity to 65bcm a year, while the 12bcm pipeline from Myanmar was recent ly inaugurated and a 38 bcm Gazprom pipeline is expected to be built from Russia to China by 2018 . This could be detrimental for potential LNG suppliers who will face increasing completion for China's remaining gas import needs.

Pipelines Take On LNG
China Natural Gas Import Capacity 2012(LHS) and 2020f (RHS), bcm

According to o ur latest LNG research , China will see a surge in regasification capacity over the next few years, b ut it is exp ected to slow. Our forecast factor s in announced LNG regasification terminal s adding the ir total capacity to the year they are expected to come online; the last is expected for 2017. However, t his does not take into account the further 58bcm of LNG capacity that has been proposed but do es not yet have a start up date , most planned by China National Offshore Oil Corporation ( CNC ) and China Petroleum & Chemical Corporation ( Sinopec ) . Much of this could be postponed or cancelled if pipeline deliveries of natural gas provide enough to meet demand.

Regasification Capacity Growth To Slow
LNG Capacity And Imports 2010-2020, bcm

Nevertheless, LNG import capacity is still expected to increase by over 60% from 2013 to 2020, and will be crucial for China's target of expanding gas use to 10% of its energy mix by 2020 . In order to achieve this , the major expansion in all areas of China's gas infrastructure - pipelines, storage facilities, LNG import - and a government drive in industrial and transportation usage will be critical. We anticipate as a result of the strong investment in natural gas infrastructure, that China will meet its 2020 goal.

This article is tagged to:
Sector: Oil & Gas
Geography: China, Turkmenistan

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