January 12, 2016 / 9:56 AM / in 2 years

UPDATE 1-China's 2016 gas demand may rise 6.5 pct, oil demand by 4.9 pct -assn

(Adds federation comment, details)

By Chen Aizhu and Adam Rose

BEIJING, Jan 12 (Reuters) - China’s natural gas demand may rise 6.5 percent in 2016, up from last year’s tepid growth, as a cut in government-set prices and efforts to promote gas usage will lift demand for the fuel, said an official at a Chinese industry association.

China’s gas demand - hit by a slowing economy and an inflexible pricing mechanism - grew at less than 4 percent in the first 11 months of 2015, official data showed, a far cry from the heady years between 2004 and 2013 when gas use jumped five-fold.

Natural gas demand is expected to rise to 199 billion cubic meters in 2016, Zhu Fang, head of market information department at the China Petroleum and Chemical Industry Association told Reuters after a media briefing by the association on Tuesday in Beijing.

In November, China’s government cut wholesale gas prices by 25 percent.

“Structural changes that promote cleaner fuels and the price cut are going to boost demand this year,” said Zhu.

A low base in 2015 also helped the growth rate, he added.

The government-backed association also predicted the country’s demand for crude oil will rise 4.9 percent this year to 570 million tonnes, or 11.37 million barrels per day (bpd).

“Stockpiling (at low oil prices) will continue to lend support to oil demand,” said Zhu. “We also expect the government to roll out policies this year to stimulate domestic consumptions that would eventually lift oil use.”

The federation calculates apparent crude oil demand by adding domestic crude oil production to net imports of crude oil, the official said.

China’s oil demand - refinery runs plus net imports - moderated in 2015, with November demand dropping 2.5 percent from the year ago period, according to Reuters calculations.

Even with demand moderating, stockpiling in government and commercial tanks has propped up growth in China’s crude oil imports, which were up nearly 9 percent Jan-Nov.

Industry experts said Chinese firms could expand purchases possibly even more this year, as new tanks become available.

The federation said earlier on Tuesday that China’s apparent oil and gas consumption is expected to rise 4.8 percent this year to about 750 million tonnes of oil equivalent.

The CPCIF also said that China’s oil and gas exploration business, dominated by state energy giants such as PetroChina and CNOOC Ltd, suffered a 69 percent decline in profits last year, whereas profits for the refining sector, led by Sinopec Corp, increased more than fourfold versus 2014. (Reporting By Aizhu Chen and Adam Rose; Editing by Christian Schmollinger)

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