According to the US Energy Information Administration (EIA), China’s natural gas demand has been growing as the government seeks to move away from coal in favour of cleaner fuels. Demand will more than triple from 5.2 trillion ft3/d in 2012 to 17.5 trillion ft3/d by 2040.
Gazprom finalised a deal with the Chinese National Petroleum Corporation (CNPC) in May. Under the first phase of the new 30 year contract, Russia will supply 38 billion m3, or 1.3 trillion ft3/y of natural gas starting in 2018. Future phases could increase the volume to as much as 60 billion m3/y. The contract links the natural gas price to international crude oil prices and operates as a take-or-pay scheme; the buyer CNPC must pay for the contracted natural gas even if it decides not to receive it.
China’s northern and eastern provinces have growing natural gas demand that cannot be met by existing pipelines or LNG, and the new Russian natural gas will mostly go to meet demand in these regions, according to the EIA. China has also committed to purchasing 38 billion m3/y of natural gas from Turkmenistan by 2016, increasing to 65 billion m3/y by 2020.
Although China continues to import more LNG, the government is committed to expanding Chinese domestic production, which increases from 4 trillion ft3 in 2012 to 10 trillion ft3 by 2040 in the International Energy Outlook 2013 (IEO2013) Reference case. Developing China’s shale gas reserves is also an important past of the government’s natural gas strategy. According to EIA’s assessment of world shale gas resources, China has 1115 trillion ft3 of technically recoverable shale gas. New production along with imports of LNG will meet rising demand in China’s eastern and southern coastal regions.
Adapted from a press release by Emma McAleavey.
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