AFTER THE ENERGY CRISIS, A DASH FOR GAS?

At the height of China's energy crisis, despite the strong focus in China on coal, global gas markets were alarmed by Chinese Premier Li Keqiang's call to secure energy supplies 'at all costs'.88 In the context of tight gas markets and already record prices in Europe, a large increase in LNG imports from China if power generators were to rely increasingly on gas instead of coal would only lead to further price spikes, exacerbating the global energy crunch. Yet gas use in China's power sector remains limited, and while its potential role and importance have been highlighted by the power crisis, this was only one factor informing China's strong appetite for gas in 2021. Robust economic activity, which led to strong industrial demand, alongside ongoing increases in residential consumption and new LNG import terminal and storage tank start-ups, all contributed to the surge in China's gas demand in 2021. The power crisis has highlighted the importance of gas in China's power mix as well as the need to hedge against price volatility. Going forward, gas in power will remain critical for peak shaving and is likely to account for the majority of China's incremental gas use. In light of this, and the government's growing focus on supply security in the aftermath of the power crunch, Chinese buyers have signed new import deals, many with US exporters, and have moved forward with plans to add new LNG import terminals. Meanwhile, in a bid to offset some of its reliance on seaborne flows, Beijing has committed to buying an additional 10 billion cubic metres (bcm) of gas from Russia via pipelines, with another large pipeline from Russia still on the table.