High prices, insufficient supply, structural imbalances

On December 13, a reporter learned from the China Petroleum and Chemical Industry Association that despite the rapid growth of China's natural gas industry, the development of chemical projects using natural gas as raw material has been slowing down. Industry experts suggest that even during the 11th Five-Year Plan period, the outlook for natural gas-based chemical projects remains uncertain. According to Li Junfa, director of the petrochemical division at the Institute of Petroleum and Chemical Industry Planning, unlike previous five-year plans such as the "85", "95", and "15" plans, the 11th Five-Year Plan does not include any specific plans for natural gas chemical projects. Li explained that when the price of natural gas exceeds 0.85 yuan per cubic meter, planning departments typically avoid approving new projects in this sector. He noted that 0.85 yuan is now considered a critical threshold — once it's surpassed, profitability becomes challenging for chemical projects. In reality, most eastern natural gas projects operate below this level, but some large fertilizer companies have seen prices rise significantly. For example, Hebei Cangzhou Dahua Group and Liaoning Panjin Chemical Group currently pay over 1.10 yuan per cubic meter, while Zhongyuan Dahua Group’s planned gas price has reached 1.28 yuan. In addition to high gas prices, insufficient supply also hinders the progress of natural gas chemical projects. Although 10 billion cubic meters of natural gas were allocated for large nitrogen fertilizer enterprises this year, actual supply only met about 80% of the target. Only a few companies, like Daqing Fertilizer Plant and Cangzhou Dahua Group, managed to reach full supply. Others, such as Sichuan Nuclear Power Group, supplied 97%, while Yuntianhua and Chuanhua maintained around 80%. However, Liaohe Chemical Fertilizer Plant under Panjin Chemical Group had the lowest supply, with an average of just 43.9% of its planned gas volume. This shortage has forced companies to seek alternative sources, increasing production costs and disrupting normal operations. Industry analysts point out that the core issue behind the slow development of the natural gas chemical industry lies in China's irrational natural gas consumption structure. A significant portion of natural gas is used for energy rather than industrial purposes. For instance, in Xi'an, 86% of the 480,000 natural gas users are for residential and heating purposes, 7% for gas stations, and only 2% for industrial use. This imbalance reduces the overall value of natural gas and negatively impacts the growth of the chemical industry. As a result, the sector continues to face challenges in both cost and availability, making long-term development difficult.

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