Gas to play key role in curbing China’s pollution, official says

China plans to develop more domestic natural gas supplies, including some from unconventional sources, and increase its gas imports to reduce its reliance on coal and address its air pollution problems, the energy division leader in the country’s Institute of World Economics and Policy said.

“I think China is ready to address emissions, particularly with the air pollution it’s experiencing,” Xiaojie Xu said during a Feb. 25 presentation at the Center for Strategic & International Studies.

“Coal will still play a major role in 2034, but not to the extent it does now,” he continued. “Technologies to reduce emissions exist, but are expensive. The best solution is to reduce consumption, which involves using more gas.”

China’s latest energy forecast predicts growing oil imports through 2035, and gas imports increasing only to 2020, when they are expected to start falling as domestic production climbs, Xu said. Much of that growth will come from coalbed methane and other unconventional sources, but not initially from gas-bearing shales, he indicated.

Its shale gas formations span across the country, but are concentrated in the Szechuan basin in the southwest, where Chinese National Petroleum Corp. is working with Royal Dutch Shell PLC in an initial project, Xu said.

He thinks it’s unlikely that China will be able to duplicate the US shale gas success. “We’ve seen independent producers play a major role here, but similar smaller companies don’t exist in China,” Xu said. He expects more opportunities to become available, but they probably will involve other multinational companies working with state enterprises.

Imports will be needed

Gas imports will have to increase until domestic production takes off, according to Xu. “We have several projects to pursue, and expect to double our imports from Turkmenistan and Kazakhstan,” he said. “Russia is in the picture too, but it will need to catch up by 2018 or the market may be gone.”

More LNG is expected to reach China from Africa, he continued. “Sino-Africa relations are a big issue,” Xu said. “I believe opportunities exist to cooperate, although accountability and transparency issues will need to be addressed. Our approach is different from US and European partners because we use integrated numbers instead of separating the upstream and downstream.”

He suggested that Chinese companies will take social responsibilities more seriously in African countries where they work. “We should help build permanent systems there,” he said.

China’s long-term energy strategy will continue to emphasize reducing consumption and increasing efficiency, diversifying outside supply sources and types of energy, and increasing domestic supplies, Xu said. For the first time, however, it also could include environmental harmony alongside economic growth, and a greater emphasis on human impacts, he added.

“Our energy policies are being researched and reviewed,” Xu said. “There still are lots of uncertainties. The market’s invisible hand can play as big a part as policies. It needs to establish a base for new technologies, although government can help. Local interests also matter.”

Contact Nick Snow at nicks@pennwell.com.

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