China’s looming pipeline reform is poised to spur competition in its natural gas industry, lowering prices and supercharging demand from the world’s top importer in years to come, according to Credit Suisse Group AG.
The government is creating a national pipeline operator from the assets of its three biggest oil and gas companies. The move — likely to happen before year-end — will break a monopoly that China’s state-owned giants have over downstream users and result in gas prices falling 10% over 2020 and 2021, the bank’s analysts including Horace Tse said in a report.
Lower prices will revitalize China’s gas demand in two years, according to Credit Suisse, predicting consumption growth of 13% in 2021. That outlook contrasts with rival Citigroup Inc.’s view that demand expansion in the world’s biggest natural gas importer will hold steady for another three to four years then slow to about 4% after 2022.
China’s gas demand has skyrocketed in the past two years amid a state campaign that favors the cleaner-burning fuel over coal. Consumption rose 15% in 2017 and a further 18% last year, but that rate may weaken to 11% this year and 10% in 2020 amid an economic slowdown, Credit Suisse said.