China is ramping up coal and natural gas production, imports, and consumption as its electricity demand jumped in the year's second half and looks to hit a record-high winter peak demand.
Chinese authorities have been keen to avoid a repeat of last year's shortages and spiking prices and have instructed utilities and producers to maximize imports and output before the winter.
Ahead of the 2023/2024 heating season, China looks better prepared to meet peak power demand than in the previous winter.
China sees its peak power demand potentially rising by 12.1%, or by 140 gigawatts (GW), this winter, a spokesperson for the National Energy Administration (NEA) said at the end of October.
Generally, China is certain that its winter power supply is guaranteed, but shortages could occur in the Yunnan province and Inner Mongolia, according to NEA spokesperson Zhang Xing, quoted by Reuters.
Previously, figures by the NEA have shown that the peak power demand in China was at 1,159 GW last winter.
This winter, peak demand is expected to be higher due to increased consumption in the second half of the year, including a hotter-than-normal summer. Related: China Issues Additional Fuel Import Quotas
China will continue to provide high levels of coal volumes to ensure stability in power supply this winter, according to the official.
Energy major CNOOC said in September that China's natural gas demand is set for an 8% increase this year compared to 2022, with imports of both LNG and pipeline gas expected to rise by around 11%.
Much lower LNG prices this year than last have helped drive Chinese LNG imports higher, potentially sapping the global market at the expense of Europe, which relies on LNG to offset the loss of Russian pipeline gas supply.
Demand in Europe and Asia is rising in November compared to the warmer October, but LNG spot prices in Asia have either dropped or remained steady in the past few weeks amid high inventories in both Asia and Europe and weak demand.
Last week, the LNG price for January delivery into Northeast Asia averaged $16.40 per million British thermal units (MMBtu), slightly down from $16.70 per MMBtu, per industry sources estimates cited by Reuters.
Last month, China told its largest natural gas suppliers to fill up their storage sites ahead of the peak winter season. The National Energy Administration noted China's gas market was "generally in balance," but full storage could better manage supply in case of disruptions in the international market.
Beijing has also asked Chinese coal miners to ramp up production ahead of peak demand season this winter.
A spokesperson for the National Reform and Development Commission—Beijing's planning agency—said that the central government would encourage local authorities and companies to work on boosting coal supply, Reuters reported earlier this month.
China relies on coal to avoid blackouts as the economy reopened after the Covid lockdowns. During the first half of this year, coal production, coal imports, and coal-fired electricity generation surged and offset a significant decline in power output at China's massive hydropower capacity due to insufficient rainfall and drought.
Chinese coal production rose by 3% year-on-year between January and September. October output fell by 1.1% from a six-month high in September due to more safety checks at mines, but was still up by 3.8% compared to October 2022, per official Chinese data quoted by Reuters.
China continues to rely on coal and coal-fired power generation to meet its growing power demand, and despite being the world's top investor in solar and wind capacity, it also plans a lot of new coal-fired electricity capacity.
During the first half of 2023 alone, China approved more than 50 GW of new coal power, Greenpeace said in a report this year. That's more than it did in all of 2021, the environmental campaign group said.
By Tsvetana Paraskova for Oilprice.com
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