China more than tripled natural gas production since 2003, producing 3.8 tcf in 2012, and the government is targeting production to reach about 5.5 tcf/year of gas by the end of 2015, according to a recent analysis from the US Energy Information Administration.
China is attempting to use more natural gas to reduce air pollution and carbon dioxide emissions, which are largely caused by coal and oil usage for energy. Underpinned by large investments in domestic gas production and infrastructure, along with growing imports, the Chinese government anticipates increasing its gas share of total energy consumption to around 8% by yearend 2015 and to 10% by 2020. In 2012, natural gas accounted for only 4.9% of China’s total energy consumption.
“Most of the anticipated production growth is from large onshore fields in the western and north-central regions of China as well as from the offshore deepwater regions in the South China Sea,” EIA said. “China’s natural gas consumption has outstripped domestic supply since 2007, triggering rising imports of both LNG and pipeline gas. China’s natural gas consumption rose at an average annual rate of 17% from 2003 through 2013, reaching nearly 5.7 tcf in 2013.”
In 2013, China imported nearly 1.8 tcf of LNG and pipeline gas to fill the growing gap between supply and demand. Imported gas met 32% of China’s demand in 2013, up from 2% in 2006.
“China is swiftly developing its LNG import capacity in the urban coastal areas and currently has 10 major regasification terminals with an annual capacity of 1.7 tcf,” EIA said. In 2012, China rose to become the third-largest LNG importer in the world, after Japan and South Korea, and in 2013, the country imported 870 bcf of LNG. Estimates for the first half of 2014 show LNG imports growing at faster levels than in previous years.
Natural gas pipeline infrastructure that links production areas in the western and northern regions to demand centers along the coast are also being planned and developed. The new infrastructure will accommodate greater imports from neighboring countries. By 2013, gas supplies from Turkmenistan, Uzbekistan, and Kazakhstan reached 974 bcf. A recently finalized gas agreement with Russia allows China to purchase and transport gas from eastern Russia through a proposed pipeline. The deal, valued at roughly $400 billion, will supply China with as much as 1.3 tcf/year of gas starting in 2018.
Meanwhile, according to EIA estimates, China holds the largest reserves of technically recoverable shale gas in the world, although investors face a variety of challenges from geological, technical and water resource, regulatory hurdles, transportation constraints, and competition with other fuels. “China’s potential wealth of shale gas, coalbed methane, and coal-to-gas resources has spurred the government to invest and partner with foreign companies that have technical expertise to unlock these reserves,” EIA said.