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Fractures Emerge In China Energy Policy

China’s winter energy policy is starting to fracture as looming gas shortages force the central government to ease restrictions on coal use by households, especially across the northern provinces.

As the winter cold sets in - nights in he north are seeing below freezing temperatures and day temps will drop below zero next week.

It is the second time in a year that the Chinese government has been forced to relax its attempts cut pollution and coal mining capacity.

A year ago in was forced to introduce price controls on thermal coal and relax bans on domestic mining to boost supplies of coal for local power stations as prices soared, forcing up the cost of electricity at the start of the so-called winer heating season (which starts in mid-November).

The Chinese government yesterday (http://www.chinadaily.com.cn/a/201712/07/WS5a28c00fa310fcb6fafd2c16.html) relaxed a ban on people burning coal to heat homes in the country’s north, thanks to the cold and a looming shortage of gas.

The policy to switch industry and residences away from coal use, to gas has aimed to cut the choking smog that blankets northern China,(and especially the capital) in winter in particular.

The state-owned China National Petroleum Corp, known as PetroChina, has warned on at least two occasions in the past month that it might be unable to guarantee supply if winter weather was harsher than normal.

The Financial Times reported that other energy companies have taken the expensive step of renting additional gas storage facilities off the north China coast. LNG prices in Asia have rebounded sharply in the past couple of months because of higher demand from China.

Chinese imports of LNG are up sharply this year. Figures out late last month showed LNG imports rose 95.7% in October from a year earlier to 3.57 million tonnes, second only to a record 3.73 million tonnes in December 2016.

China’s LNG imports are forecast to rise 40% year-on-year to 20 million tonnes this winter (from mid November to mid March), as companies bring in more spot cargoes on top of supplies under term contracts.

Customs data showed that China’s imports for the first 10 months of the year climbed 48% from the same time a year ago to 29.09 million tonnes. Updated figures for November will be issued later today

The surge in demand is luring spot cargoes from countries like Norway and Nigeria that are not traditional LNG sources for China.

The impact on Australian LNG companies such as Woodside, Santos and Origin won’t be known until we see December quarter production and sales reports next January.

“Villages that have not converted to gas may use still coal for heating, or other substitute fuels,” the Chinese environmental ministry said in a notice made public on Thursday.

It called for a secure supply and stable price to places that had already converted to gas.

“Civilian use of gas must be prioritised over others, including industry,” the ministry said.

The China Daily reported yesterday “In a document released on Monday marked “extra urgent”, the Ministry of Environmental Protection said areas within or neighbouring the Beijing-Tianjin-Hebei cluster could restart consuming coal “if their projects to replace coal-powered heating units with gas and electricity facilities were not finished”, news website The Paper reported.

“The document, which was sent to 28 cities, including some in Henan, Shandong and Shanxi provinces, stressed that “the priority is to guarantee heating service for residents”.

“Some places have been left without heat due to a failure to complete new clean-energy boilers in time for the start of winter, resulting in freezing homes and schools, media have reported.”

View More Articles By Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.



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