China's natural gas output fell 2 percent in May from a year earlier, official data showed on Thursday, its second straight month of decline as the market expects Beijing to announce another price cut in the coming months to lift slowing demand. Output recorded a 2.9-percent year-on-year drop in April, to 9.4 billion cubic metres (bcm), the lowest since July 2014 in outright volumes. Such drops in output have been rare.
Production was 9.9 bcm in May, slightly higher than April on a daily basis. Total output in the first five months of 2015 climbed 2.1 percent from the same period the year before to 53.2 bcm, the National Statistical Bureau (NSB) said. China, the world's largest energy guzzler, is keen to boost the use of natural gas to cut emissions and fight air pollution. But demand has been hit since last year as domestic prices, which are regulated by the government, were not cut until April, lagging the steep declines in global oil markets that Beijing uses as a benchmark for gas pricing.
In the first four months of 2015, China burned 62.9 bcm of gas, up a tepid 2.4 percent from the same period last year, according to the National Development & Reform Commission. Industry sources said Beijing may move to cut city-gate, or wholesale gas prices again in the coming months to lift demand. Factories that produce items such as ceramics and glass have curbed gas purchases, while the use of gas as a transport fuel has also eased as its price competitiveness relative to diesel narrows hugely.
"The sharply slowing demand growth would be the fundamental reason for government to cut prices," said a Singapore-based China gas analyst. The International Energy Agency said last week China would lead Asia's gas demand over the next five years, with demand rising 10 percent a year. The slowing growth in domestic production is partly compensated for by a large increase in pipeline imports which rose nearly a third in the first four months to 8.82 million tonnes.
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