Skyrocketing liquefied natural gas spot prices could shut down some of China's gas-fired power plants because they cannot afford the high-priced imports to fuel their turbines.

The country is already feeling the pain of power supply shortages in some regions as high summer demand has stretched thin its coal-based power generation capacity.

Costly spot cargoes have forced operators of gas-fired plants that rely on LNG for feedstock to run at lower capacity or even shut down.

Yang Mengyun, deputy director of the East China Energy Supervision Bureau of the National Energy Administration, told a conference in Shanghai that high LNG prices have driven up power plant operational costs.

“Some LNG-based power plants without having secured LNG supply from long-term supply deals face risks of shutting down their units,” she said.

Yang added that LNG prices had been on the rise since the second quarter and are also having an impact on industrial consumers.

“Industrial operations are also feeling the pressure of high LNG price,” she said.

Jiang Xuefeng, deputy director of the Economic and Technical Research Institute — the think tank of China National Petroleum Corporation — told the same conference that in the first seven months of this year, the LNG price in Asia’s spot market ranged from $5.99 to $16 per million British thermal units, averaging $9.70 per million Btu, which is 1.62 times higher than the same period a year ago.

“The price for Asia spot LNG cargoes for September delivery is now five times that of a year ago,” Jiang said, without giving an absolute figure.

He said economic recovery in Asia has helped boost the price. During the period, spot LNG demand in Asia increased by 33% year on year to 47.62 million tonnes.

In the first half of 2021, Jiang said, domestic gas production rose 9.3% year on year to 103.8 billion cubic metres. Meanwhile, imports increased by 29.2% to 81.4 Bcm — 28.3 Bcm of pipeline gas (up 24%) and 53.1 Bcm of LNG (up 32.3%).

Jiang predicted that for the whole of 2021, gas demand will increase by 13% to 369 Bcm.

Adding to the China's energy woes, Yang said coal stocks are drawing low amid the high demand for power generation. Coal accounts for 58% of the nation's generation.

LNG

Soaring spot LNG price threatens China's gas-based power generation