Domestic Gas Pricing Issues Impede Gas to Curb Growth In Coal Generation

China, the fastest growing gas market globally, is forecast to keep growing at rates of around 20 percent, Anne-Sophie Corbeau, senior analyst at the International Energy Agency (IEA) said today, but she cautioned that the two-tier pricing system, with high prices paid for LNG imports and regulated low domestic gas prices, will keep hampering the growth of gas generation.

"Coal displacement of gas generation, is not an issue in China as it is in Europe;  it is rather that coal demand is rising along with gas demand and the question is how much gas generation can curb the growth in coal generation," Corbeau told 'Gas to Power Journal' on the sidelines of the Gastech conference today.

Pricing terms of gas imports into China, as well as other key Asian gas markets such as Japan and South Korea, is vital to support the expansion of the gas generation sector in China.

Corbeau expects that spot price elements will be introduced in Asia's oil-indexed gas import contracts in Asia.

"It is just a question of time when this will happen," she said, cautioning that it took decades for the European gas market to reach its current status of liberalization.

Asked which spot trading hub - Singapore or Shanghai – will win the race to become the preferred reference spot price in Asia, Corbeau said:

"The evolution of a Singapore gas hub price will happen earlier as there is already significant commodity trading going on in the city state, while the Shanghai traded hub needs to attract both more physical supply volumes and more financial players to help increase liquidity."

(Gastpowerjournal, Edited by Topco)