Analysts say Guangdong, China's manufacturing hub, is seeing its "shift to natural gas" strategy put to the test as a surge in power demand coincides with higher fuel prices driven by the Middle East war.
According to Bloomberg on the 13th local time, electricity use in Guangdong is rising quickly due to manufacturing expansion and growing demand from electric vehicles and data centers. In the first quarter of this year, Guangdong's power consumption increased 7.6% from a year earlier.
Guangdong is China's largest export manufacturing base, home to electronics, home appliances, batteries, and data centers. It is also the country's most concentrated region for liquefied natural gas (LNG) terminals. Because it is far from inland coal fields, it relies heavily on imported natural gas and power transmitted from outside.
As Beijing emphasizes energy self-sufficiency, Guangdong has made large-scale investments in nuclear power, offshore wind, and solar. In particular, the province has actively expanded gas-fired generation to improve air quality. According to Bloomberg, Guangdong's gas power capacity is larger than the combined total of France and Germany.
The problem is that fuel import expense is surging due to supply disruptions from the Strait of Hormuz after the Middle East war. China sources about 30% of its LNG imports from Qatar and the United Arab Emirates (UAE). As LNG prices have jumped, Guangdong's spot power prices have doubled compared with before the war. The average power price in April was 509 yuan per megawatt-hour (MWh) (about $75), nearly twice February's level before the war.
Bloomberg said the crisis is shaking China's strategy of viewing natural gas as a "bridge" fuel between coal and renewables. Some generators have already cut output to curb losses or are considering expanding coal and renewable use. In particular, ceramics producers have reportedly reduced production or halted operations at some plants due to the spike in fuel costs.
Some speculate that in the upcoming summit between U.S. President Donald Trump and Chinese President Xi Jinping, China could pledge to increase purchases of U.S. energy to offset reduced Middle Eastern supplies.
U.S. LNG exports to China are also taking shape. According to Reuters the same day, for the first time since the launch of Trump's second term, three LNG carriers sailing directly from the United States to China recently departed from an LNG export facility in Louisiana. If the ships arrive in Tianjin as scheduled, it would mark the first direct U.S.-to-China LNG shipment in about a year and four months. The White House, however, did not comment.
China's government and industry see the likelihood of large-scale blackouts as limited for now, but there are concerns the grid could come under more strain if summer heat waves and cooling demand pile on. If LNG supply disruptions persist, they are expected to affect China's energy security strategy and carbon reduction policies.
Deng Semeng, an analyst at Rystad Energy, said, "If the Middle East crisis continues into the summer, Guangdong may raise its reliance on coal instead of expensive LNG."