• sandravedeld

In a bid against air pollution China is increasing its natural gas production and consumption

Mis à jour : 6 nov. 2018

Originally published in Forship Asia News & Media

Pollution in China

Forty years of exponential economic growth has made China one of the main carbon emitters in the world. Although pollution has routinely been excused as an inevitable consequence of increasing prosperity, China has, in recent years, changed its approach to smog and introduced hard-hitting green policies. The Chinese government is in fact determined to rely less on coal burning and more on cleaner energy sources such as natural gas.

Increasing natural gas consumption to counter pollution

China has set the goal to have natural gas account for 10% of its energy by 2020, and drastic measures taken by the government in 2017 lead to a 15 percent increase in consumption. This surge was a direct consequence of new regulations aiming to switch factories and 1.2 million homes from coal to gas. This initiative was however botched as it turned out China at the time only had enough gas to supply 400,000 homes and the government had to issue an emergency order to allow affected people to return to burning coal. China’s willingness to increase gas consumption nevertheless remains strong.

China is the sixth-largest gas producer in the world in 2018 but its substantial output does not meet the country’s consumption needs. The International Energy Agency has in fact predicted that the Chinese demand for natural gas will increase by nearly 60 percent between 2017 and 2023, and that the country will become the world’s biggest importer of natural gas already in 2019.

Significant production growth but not enough to meet demand

According to the National Bureau of Statistics, gas production in China rose 8.5 percent between 2016 and 2017, and the China National Petroleum Corp has predicted local gas output to increase between 6 and 8 percent a year until 2020.

However, although China produced almost all of the gas it consumed a decade ago, it is now reliant on imports for 40% of supply - a number that could rise to 65% in upcoming years. Despite a significant increase in local gas production, it is not able to meet the exploding demand; wherefore China’s gas imports surged by 28 percent in 2017.

Investment opportunities in gas production

Countries and international firms are basing their export businesses on supplying large amounts of gas to China to meet growing demand. They however rely on China’s current inability to provide for its own gas consumption, and their future will depend on how much gas China will be producing and/or importing in upcoming years.

Over the past two decades, China’s proven gas reserves have almost quintupled. The US Energy Information Administration has ranked China among the top ten holders of proven natural gas reserves, and as home to the world’s largest reserves of shale gas.

China should thus theoretically be able to produce more than enough natural gas to meet its own needs. Shale production in China further accounts for only 7-10 percent of domestic output, in comparison with 85 percent in the United States. There are indeed great opportunities in shale production, which could very well double by 2020.