1. China’s gas needs growing
- China’s consumption of natural gas is rising faster than its production, with the gap met by rising volumes of imports. In 2018, imports accounted for 45 percent of China’s gas supply, up from 10 percent in 2010, according to the EIA.
- China has tried to scale up shale gas production, with mixed success. Gas output is on the rise, reaching 15 billion cubic feet per day (bcf/d) in 2018, but demand (and thus, imports), are growing faster.
- Recognizing the growing import dependence, China introduced new subsidies for gas production in June 2019, and the government also loosened restrictions on foreign companies operating independently.
- China accounts for the largest source of LNG demand growth going forward, so new LNG export terminals around the world are constructed with an eye on China. But if China succeeds in ramping up domestic supply, that would cut into LNG import demand in the years ahead.
2. Petrochemical slump
- Petrochemicals have been lauded as the next source of growth for the oil industry. Soaring plastic consumption is an environmental disaster, but oil companies, particularly the majors, see plastics as a growth sector and a hedge against peak oil demand for transportation.
- In the short run, the market for polyethylene, a building block of plastic, has fallen sharply. Prices are down 22 percent in the past year.
- The U.S.-China trade war has put…
