Sino Gas & Energy - Chinese gas demand in November +20% on prior year ahead
Sino Gas & Energy Holdings (ASX:SEH) has noted a report by RBC Capital Markets analyst Ben Wilson regarding increased demand for gas in China last month. Chinese natural gas consumption for November was 23.2bcm, up about 20 per cent on the prior period and running up 19 per cent YTD on 2016 figures. RBC has reaffirmed that Sino Gas stands out as its favoured pick among the junior E&Ps with its direct China gas consumption exposure as it ramps up production in the Ordos Basin.
Sino Gas & Energy Holdings Limited (ASX: SEH, “Sino Gas” or the “Company" notes a report by RBC Capital Markets analyst Ben Wilson with regards to increased gas demand in China in November 2017.
Chinese natural gas consumption for November was 23.2bcm (~27.8bcf/d) which is +20% on the prior period and is still running +19% YTD on 2016. Chinese gas production, which was up a more modest +2% for November at 12.6bcm (~15.2bcf/d), is +10% YTD on last year. This is a strong run up to the core winter heating months of December-February which over the past few years have been the strongest gas demand months.
The scale of the government mandated coal to gas switching has seen demand outstripping supply with suppliers cutting back on gas supplied to industrial customers to meet residential heating demand - see China Gas: CNPC flags winter gas rationing for industrial customers amid surging demand.
Demand has caused price spikes in areas where pricing is unregulated, e.g. trucked LNG that has seen the NDRC call producers and LNG terminal operators to meet over pricing concerns (China Gas: Push to regulate supplies as prices spike on winter demand).
The government is targeting an increase in gas usage to a range of 8.2-10% of the total energy mix by 2020 from the current level of ~6.2%. If gas consumption continues to grow at 15%, then RBC believes the upper end of this target would be exceeded.
RBC has reaffirmed that Sino Gas stands out as its favoured pick among the junior E&Ps with its direct China gas consumption exposure as it ramps up its production in the Ordos Basin (Sino Gas & Energy Holdings Limited - Primed to start closing the price-valuation gulf). The strength in demand has recently allowed Sino to increase gas pricing for Sanjiaobei sales by 7-17% (Sino Gas: Slew of positive announcements highlight translation of the macro to the micro).
RBC has set a price target for Sino Gas of 35 cents per share. Sino Gas shares last traded at 15.5 cents.