Last year, the production volume of natural gas increased to 121 billion m3, 9.8% year on year, including 117.8 billion m3 of conventional natural gas, 200 million m3 of shale gas and 3 billion m3 of coalbed methane, according to a new report. The demand for natural gas increases significantly as transform projects from coal to natural gas are launched in China after 2013. Natural gas was in short supply as the increases in synthetic natural gas (SNG) and imported natural gas fell short of expectation in 2013.
Natural gas demand
The market demand, according to the report, will continue the upward trend as energy policies are adjusted. China is the third largest consumption country of natural gas in the world. The demand for natural gas is estimated to keep increasing while the proportion to the total consumption of primary energy is expected to be 6.3% this year. The supply of natural gas is unable to meet demand.
The reserve and production volume of conventional natural gas are unable to meet the increasing demand in China. Moreover, the government reinforces the measures to increase proportion of clean energy consumption, which also stimulates the demand for natural gas.
Imports and prices
The import of natural gas relieves the insufficient domestic supply as the production volume of natural gas possesses limited potential for growth in China. The dependence ratio of oil gas on imports keeps increasing. The import volume of natural gas was 53.4 billion m3 in China last year, an increase of 25.6% year on year. The growth rate of pipeline gas and LNG were 24.3% and 27% respectively. The apparent consumption of natural gas was 169.2 billion m3, an increase of 12.9%. The dependence ratio of natural gas on imports exceeded 30% last year.
The Chinese government set the factory price of natural gas, while the retail price is set by local government. This means that the retail price may well be lower than the factory price. Enterprises with integration of upstream and downstream can avoid the risk while pure downstream enterprises may suffer loss.
The report expects the demand for natural gas and LNG will increase rapidly as the Chinese economy develops and urbanisation accelerates in the future. The market potential of natural gas and LNG is huge as over half of China’s households use firewood or coal as a fuel.
Many investment opportunities exist for natural gas and LNG exploration enterprises, trading enterprises and equipment manufacturers in the market. Non-state owned funds are however subject to many restrictions in the field of natural gas exploitation. Private and foreign funded enterprises can invest in shale gas, coal bed methane and LNG fields, which have different preference policies from the government.
Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/27052014/chinese_lng_nat_gas/