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Chinese LNG Plants Reopen In Sign Of Easing Gas Crunch

Around a dozen of China’s liquefied natural gas (LNG) plants have resumed production in recent days, Reuters reported on Wednesday, citing company sources, in what could be a sign that China may have eased the order for diverting gas supplies to residential customers and that this winter’s heating crisis may have started to relax.

At the beginning of the winter, China ordered the giant local gas producers Sinopec and China National Petroleum Corporation (CNPC) to divert gas supplies to residential customers and prioritize residential heating to industrial customers as China was bracing for the first winter in which millions of households switched to gas from coal as part of the Chinese push to fight air pollution.

Now the heating crisis may have started to ease, as company sources at LNG plants tell Reuters that at least ten of those facilities have resumed liquefying gas after having halted operations for some two months. During those two months of the winter, China was scrambling to cope with the surge in gas demand amid the gas-to-coal switch.

China’s push to have millions of households and thousands of industry users switch from coal to natural gas led to an unprecedented increase in natural gas demand and imports. The Chinese drive to burn more gas instead of coal left residents in the north freezing in a cold snap in early December, prompting China to backpedal on the coal ban in some areas to ease natural gas shortages. Ahead of the longest holiday period in China—the Lunar New Year in the middle of February, the country was gobbling up LNG cargoes from all over the world as it was trying to avoid severe natural gas shortages.

The restart of at least 10 LNG plants in recent days that now have the supplies to produce LNG signals that the crunch in gas supplies has let up, and higher temperatures ahead mean that residential demand will drop from the peaks of the past two months.

In the coming weeks, more of China’s LNG plants are expected to resume operations as gas supplies improve, Zhang Mengjie, gas analyst at Shandong-based Longzhong Information Group, told Reuters. Longzhong data has shown that domestic LNG plants were operating at just 27 percent of capacity as of last week, compared to 38 percent for the same period last year and to the usual capacity of 50 percent.

By Tsvetana Paraskova for Oilprice.com

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