North China suffers shortage of natural gas due to price hike
Mar 03, 2022
Beijing [China], March 3 : Amid a big jump in international market prices coupled with the harsh winter season, some parts of North China are suffering from a shortage of natural gas.
Ma Chenchen, writing in YICAI Global said that residents of Weinan city in northwestern Shaanxi province were sent a letter of apology by the city's natural gas company on February 25 saying that demand had surged due to heavy snowfall and a drop in temperatures earlier that month, causing some customers to have no gas during peak hours.
Places in Hebei province, which neighbours Beijing, had interrupted supply in the beginning and middle of last month, the Chinese government posted on its website.
Gas companies are also under great pressure as the price of liquid natural gas has jumped 25 per cent over the past week and 75 per cent over the past month to CNY8,383 (USD1,328) a ton, or CNY6 (USD0.95) per cubic meter, according to the Shanghai Petroleum and Natural Gas Exchange.
Most gas companies pen long-term supply contracts with fixed purchase prices and amounts with suppliers, an industry insider told YICAI Global.
Although gas firms sometimes need to buy gas at market prices when actual demand is greater than the contracted supply, such a huge gap in prices makes them less willing to take part in auctions, leading to a supply shortfall.
"This round of hikes in natural gas prices is similar to last year's rise in coal prices which led to coal-burning electric power plants unable to afford to buy coal and many shut down or severely cut operations leading to a national power shortage," Feng Yongsheng, associate researcher at the National Academy of Economic Strategy under the Chinese Academy of Social Sciences, told YICAI Global.
The difference between the two incidents is that China's dependence on coal imports is very low, whereas for natural gas it stands at over 40 per cent, making it difficult for government agencies to find solutions to guarantee supply and stabilize prices, Feng said.
