EB Securities: China's natural gas supply and demand are expected to increase in the long term, and the natural gas market is expected to remain prosperous.

EB SECURITIES released a research report stating that in 2024, China's demand for natural gas in areas such as residential, transportation, industrial substitution, and power generation is expected to increase. The consumption of natural gas is rapidly growing, with the apparent consumption of natural gas from January to November reaching 386.2 billion cubic meters, an increase of 9.3% compared to the previous year. The IEA predicts that China's demand for natural gas will grow by 7.8% in 2025, making it one of the fastest-growing regions in the world for natural gas demand. With steady demand growth and the continued promotion of the "increase storage and production" action, China's natural gas production is maintaining high-speed growth, with the country producing 224.6 billion cubic meters of natural gas from January to November in 2024, an increase of 7.2% compared to the previous year. As the main force in domestic natural gas production, the "three barrels of oil" have maintained high growth in natural gas production. In the first three quarters of 2024, Petrochina, China Petroleum & Chemical Corporation, and CNOOC Limited produced 107.8 billion, 29.7 billion, and 19.7 billion cubic meters of natural gas respectively, with year-on-year growth rates of 4.0%, 5.6%, and 8.9% respectively. In terms of imported gas, on December 2nd, the China-Russia East-West natural gas pipeline was fully connected, increasing the annual gas transmission capacity to 38 billion cubic meters. With the continuous growth of self-produced gas and imported gas, China's domestic natural gas supply is expected to continue to rise in the next 25 years, playing an important role in ensuring energy security. Russia's stoppage of natural gas supply to Europe through Ukraine has caused short-term energy price disturbances in Europe. On January 1st, Russia announced that it would stop sending natural gas to Europe through Ukraine. In 2024, Russia exported a total of 33 billion cubic meters of natural gas to Europe through pipelines, a 78% decrease from 2021, and 16.4 billion cubic meters through the Ukrainian pipeline, a 59% decrease from 2021. After Russia stopped the supply, Europe will face a gap of about 16 billion cubic meters in gas imports, leading to short-term supply disturbances. The latest halt in supply marks the end of Russia's dominant position in the European energy market for the past 50 years and the official end of the era of providing cheap natural gas to power the European economy. From 2023 to 2024, Europe gradually decoupled from Russian natural gas and turned to LNG imports, with Russia's natural gas imports accounting for 11% of Europe's total natural gas imports in 2024, a significant decrease from 41% in 2021. However, the cessation of gas supply through the Ukrainian pipeline still caused short-term disturbances in Europe's energy prices, with TTF natural gas prices rising continuously since the fourth quarter of 2024, reaching 50.27 euros/MWh on January 2nd, the highest level since 2024. In addition to normal seasonal factors, the lack of Russian gas supply and LNG shortages are also contributing to the rise in gas prices. North American LNG exports are expected to increase in the long term, and natural gas prices in Eurasia are expected to trend towards a balance. According to the plans for North American LNG export facilities, North American LNG export capacity is expected to double from 11.4 Bcf/d in 2023 to 24.4 Bcf/d in 2028. The EIA predicts that between 2024 and 2028, the liquefied natural gas export capacity of Mexico, Canada, and the United States will increase by 0.8 Bcf/d, 2.5 Bcf/d, and 9.7 Bcf/d, respectively. The three countries currently have a total of 10 projects under construction. Due to long-term export capacity constraints, domestic natural gas prices in the United States have been lower than those in Europe and Asia. With the Trump administration lifting the ban on LNG exports, the construction and commissioning of LNG export facilities in the United States are gradually increasing, and US LNG exports are expected to grow significantly, easing the import of LNG to Europe and East Asia in terms of both volume and price. Risk Analysis: Slower-than-expected growth in upstream capital expenditures, and significant fluctuations in crude oil and natural gas prices.