China launches gas exchange

This is very bullish for the domestic China gas story in general and for producers such as SEH in particular.
Enjoy...

China launches gas exchange
Shareholders aim to develop trading tool into an international gas trading platform
Xu Yihe
Singapore
28 Nov 2016 02:41 GMT Updated 28 Nov 2016 08:36 GMT

China has launched a trading tool for market participants to buy and sell conventional and unconventional natural gas as well as liquefied natural gas, in part to establish a China-based gas price but also to develop the country into an international trading hub.

The shareholders aim to develop the Shanghai Petroleum & Natural Gas Exchange (SHPGX) into an international gas trading platform on par with Henry Hub in the US and National Balance Point in the UK, and establish itself as the benchmark for gas in the Asia Pacific region within five years.

Currently only domestic spot and physical gas cargoes are being traded, with paper contracts and other gas directive contracts expected to be developed later. At the exchange, spot transactions will be reported upon their completion.

Registered in 2015 with 1 billion yuan (US$145 million), the exchange has up to 10 shareholders, including the country’s top three national oil companies – China National Petroleum Corporation with 10% equity, Sinopec with 10% and China National Offshore Oil Corporation 10% as well as national broadcaster Xinhua News Agency with 30%.

Independent gas distributors and power utilities ENN Energy Holdings, Shenergy Group, Hong Kong & China Gas, Beijing Gas Group and China Gas Holdings each have a 7% interest, while Huaneng Power International has a 5% stake.

It already had 269 registered members by the end of October, including 260 trading companies. Since the official inauguration on Saturday, following a 16-month test run in Shanghai, the SHPGX has started publishing China Ex-plant LNG Price Index and South China LNG Price as well as indices for some oil products such as gasoil.
The SHPGX will initially trade natural gas, with volumes to be traded this year expected to reach 30 billion cubic metres, accounting for 16% of China’s total gas consumption.

During the trial run in 2015, 13.3 Bcm of gas was traded at the exchange, including 12.9 Bcm of pipeline gas and 315,000 metric tonnes (465 million cubic metres) of LNG.

Xu Shaoshi, the chairman of the country’s power economic decision making body the National Development & Reform Commission, said at Saturday’s inauguration that SHPGX will help China improve its gas pricing mechanism and push the country to become a member of the international gas trading community.
The exchange is being launched at a time when China’s gas demand is about to peak during the winter and the NDRC has encouraged consumers to seek their supplies from the trading tools available at the SHPGX.
According to a decree issued by the NDRC late last year, the gas being traded at the exchange will be largely for non-residential consumption.

China is now the world’s third largest gas consumer, with demand this year expected to reach 205 Bcm, 60% of which is for non-residential use.

To facilitate the trading at the SHPGX, China’s top three NOCs, which control more than 90% of the country’s gas infrastructure, disclosed detailed information about their gas pipelines, storage tanks and LNG terminals so as to enable access for independent players under fair competition.