Summary of Key Points from the Conference Call Industry Overview: China Oil & Gas Key Insights - Gas Demand Growth: The forecast for China's gas demand growth has been revised down to 4% per annum for FY25, from a previous estimate of 5.8% for FY24, due to weaker GDP growth and decelerated demand from industrial sectors [1][3][4] - GDP Impact: The macroeconomic team has cut the FY24 GDP forecast to 4.8%, which is expected to impact gas demand negatively [1][3] - Demand Drivers: Despite the slowdown, there are still solid demand drivers including: - Residential and heating supply, accounting for approximately 25% of total consumption - Increasing adoption of LNG trucks, which are economically beneficial compared to diesel trucks (RMB1.4/km lower) - Rising demand for gas power generation to support new energy initiatives [1][3][4] Production and Supply - Production Capacity: China's gas production capacity is expected to grow steadily, reaching 247 billion cubic meters (bcm) in FY24 and 262 bcm in FY25, reflecting a growth rate of 6.1-7.2% per annum [1][4] - Storage Capacity: By the end of FY23, China's gas storage capacity is projected to reach 6% of demand, with plans to increase this to align with global averages in the medium term [1][4] - Import Dependency: The import dependency for natural gas is expected to decrease to 38% by FY25-26, down from 40% in FY24 [1][4] Market Dynamics - Long-term Contracts: China is expected to secure long-term LNG contracts from the US and Qatar, which will reduce reliance on spot imports [1][4] - Price Stability: Near-term gas prices are expected to stabilize, with a projected 2% year-on-year increase in average selling price (ASP) for 2H24 [1][4] - Profitability of Major Players: PetroChina reported a loss of RMB4 billion in its imported gas business in 1H24, while Sinopec achieved a profit of RMB380 million [4][6] Demand Forecasts - Revised Demand Growth: The revised forecasts for gas demand growth are 5.8% for FY24, 3.9% for FY25, and 3.0% for FY26, reflecting a downward adjustment from previous estimates [3][4] - Apparent Demand: In the first eight months of 2024, China's apparent gas demand was 280 bcm, representing a 9.6% year-on-year increase, with real demand growth estimated at 6-8% [4][6] Conclusion - The outlook for the China oil and gas industry indicates a mixed scenario with slower growth rates due to economic factors, but sustained demand from residential and industrial sectors, alongside strategic long-term contracts, may provide stability in the market [1][3][4]
China Oil & Gas_ Stable 2H24 gas ASP, 4% demand growth in FY25; more storage to mitigate glut