PETROCHINA(SH:601857)2025-12-20 09:54Summary of Key Points from the Conference Call Industry Overview - The report focuses on the Asia Oil & Gas sector, particularly the dynamics of natural gas supply and demand in China and the implications of increased Russian gas imports through the Power of Siberia 2 (PoS-2) pipeline [1][2][3][10]. Core Insights and Arguments - Gas Demand Projections: China's gas demand is projected to peak at 563 bcm/y by 2035, which is 5 years earlier than the estimates from state-owned oil and gas majors, who expect it to peak at 620 bcm/y [2][25]. - Slowing Demand Growth: The growth rate of gas demand in China may slow due to a shift towards electrification and a peak in the coal-to-gas transition. The apparent consumption of natural gas dropped 0.3% year-on-year in the first ten months of 2025, with LNG imports declining by 16% year-on-year [2][16]. - Russian Gas Influx: By 2035, it is estimated that 68 bcm of natural gas could be delivered to China from Russia, representing a 62% increase from the 42 bcm expected in 2024. This would account for 26% of China's total gas imports [3][4][10]. - Impact on Pricing: The influx of Russian gas, particularly through PoS-2, could exert downward pressure on regional gas prices, as China consumes 28% of all LNG imports in Asia [4][10]. - Utilities and Infrastructure Benefits: Improved gas supply sufficiency could benefit downstream utilities by lowering input costs, enhancing margins, and increasing competitiveness against alternative fuels. Target prices for companies like ENN have been raised from HKD 74 to HKD 79 based on lower debt costs [5][10]. Additional Important Insights - Supply-Demand Scenarios: The report examines various scenarios for gas demand and supply, considering factors such as industrial output and the development of green liquid hydrocarbons. A potential supply glut in 2026 and beyond is anticipated, leading to moderation in pricing [2][10]. - Long-term Outlook: The report suggests that if energy transition and piped imports from Russia ramp up quicker than expected, the availability of gas could become looser after 2030, reducing reliance on LNG imports [2][10]. - Investment Recommendations: The report recommends buying stocks of ENN, Kunlun, PetroChina, and GAIL, which are expected to benefit from the evolving gas supply landscape [5][10]. Conclusion - The evolving dynamics of China's natural gas market, influenced by increased Russian imports and a shift towards electrification, suggest a potential oversupply scenario in the coming years. This could lead to lower prices and create opportunities for utilities and infrastructure operators in the region [2][10].