Guangdong Reforms Squeeze China's Gas Demand Growth
China's natural gas demand is expected to slow down due to reforms in the electricity market of Guangdong province. According to Wood Mackenzie Ltd, the province's gas-fired plants have shifted from steady power generation to mostly peak-time operations.
The change reflects the rapid growth in clean energy and the increased use of renewable sources. As a result, gas plants are being used to balance intermittent renewables output instead of delivering baseload power.
The shift is significant because Guangdong province accounts for about one-third of China's gas-fired capacity. The country relies heavily on imported liquefied natural gas (LNG), which has been affected by price spikes due to the near-closure of the Strait of Hormuz.
WoodMac principal analyst Kai Dong said that with China's other provinces following similar frameworks, the key question for the global LNG market is how much less demand growth this could mean than previously anticipated.