Stephen Tusa, JP Morgan analyst, and General Electric bear believe that China's plan to build its own turbines in the future threatens the gas turbines built by the company's GE Power division.
GE CEO Larry Culp announced his plans to fix the power division and improve liquidity at the Electrical Products Group conference in Florida last week. The CEO was asked about his plans as in case of a new Chinese competition enters the power market.
According to Siemens CEO Joe Kaeser, a Chinese national champion could be formed by the government to sell power turbines like the one's Siemens and GE produce, inside and outside of China.
Mr. Culp believes that China is important but it isn't what they are banking the turnaround in power on and particularly in gas power.
Mr. Tusa said in a Tuesday research report that emerging competition from China is coming not just within the country, which looks to be largely shutting out GE at this stage, but also set to emerge globally.
China's demand for gas continues to rise because of the policies of the government that tends away from coal for air-quality reasons. It is an important market for gas-based power generating turbines which means that less demand from China for foreign turbines could be a big problem in the long run.
China proposes to switch from coal to natural gas for heating and industrial purposes. The Chinese government plans to increase its use of natural gas to 15% of China's overall energy mix by 2030.
Mr. Tusa said that the market for gas-based power generation is 25 to 30 gigawatts and China has averaged 6 gigawatts a year on average for the past eight years. The country also consumes some 360 gigawatts of power from coal-powered electricity which means that all turbine makers could benefit from the transition of the Chinese government to clean energy.
China's future gas production is expected to greatly impact its natural-gas import needs. The total domestic gas production of the country reached 161bcm which mostly came from conventional sources. China plans to increase its gas production to approximately 240bcm by 2030.
The country's demand for natural-gas imports and liquefied natural gas will continue to expand.
The country is projected to become the world's leading natural-gas importer and in 2022. It will also surpass Japan as the leading importer of LNG. China is also expected to increase its production capacity for domestic gas and expand its pipeline infrastructure.
