(Yicai) March 3 -- China’s domestic natural gas inventory is ample, and demand is declining, so the overall impact from the escalating tensions in the Middle East remains controllable, according to industry insiders.

March and April mark a transition from peak to off-peak season for Chinese natural gas consumption, with urban gas demand gradually easing, so the closure of the Strait of Hormuz will mainly affect the domestic market only in the short term, said Wang Yafei, a natural gas analyst at JLC. However, he pointed out that close attention should be paid to the length of the disruption.

On Feb. 28, the United States and Israel launched airstrikes on Iran, which later retaliated with military force and yesterday closed the Strait of Hormuz, one of the world’s most critical oil and gas transit routes between Iran and Oman.

The Asian liquefied natural gas benchmark (Japan-Korea-Marker) stood around USD13.1 per million British Thermal Units, and the Dutch title transfer facility natural gas futures reached EUR39.30 (USD5.70) per megawatt-hour as of 5.30 p.m. yesterday, both surging more than 20 percent throughout the day. International oil prices rose around 8 percent yesterday.

“Chinese natural gas inventories are abundant, and risks from short-term supply disruptions can be mitigated by releasing inventory and using substitute energy sources, such as coal, new energies, and pipeline gas from Central Asia,” another analyst said.

Last month, China issued a policy adding natural gas imported through approved cross-border natural gas pipelines and LNG receiving, storage, and transportation projects to the scope of import value-added tax rebates. Analysts told Yicai back then that this policy could help firms hedge against cost pressures when international gas prices rise sharply.

Because of the complex and volatile international geopolitical and economic environment, Chinese enterprises should formulate contingency plans in advance and adjust responses in a timely manner based on changes at home and abroad, the above analyst suggested.

Drawing from experience from the Israel-Iran conflict last June, even if it ends in the short term, the recovery cycle, including physical mine clearance and the restoration of loading capacity, will exceed half a month, according to a natural gas analyst at an international energy agency.

Editor: Futura Costaglione