BAKU, Azerbaijan, Jan.23. The long-term outlook for natural gas production growth in China remains constructive supported by uptick in exploration activities, Trend reports with reference to Fitch Solutions.
“We expect the state-owned companies to step up exploration and production from offshore, shale, tight gas and CBM from oil and gas basins principally including Sichuan Basin, Ordos Basin, and Tarim Basin which have been a major source of gas production. We project China’s natural gas production to increase at an average of 2.2 percent annually between 2022 and 2031 well below demand growth of 4 percent during the same period. About 55 percent of China’s gas supply requirements in 2021 is met by domestic production, and the remainder by pipeline gas and LNG imports,” reads the latest report from Fitch Solutions.
The company’s review of gas production prospects from forthcoming offshore projects points to upside, which could potential raise the share of domestic production as a percent of total gas demand up to 60 percent by 2025, but its share will decline to 50 percent over the long term.
“Mainland China has limited choices but to look to gas as an option to support its ambitious 'coal to gas' fuel switching policy. The government’s 'coal to gas' switch policy driven by China’s pledge to reach carbon neutrality by 2060 is centred around three key demand centres – power, industrial and city gas for residential and commercial sectors. The state-owned China National Petroleum Corporation in 2021 sets an ambitious target of increasing the share of gas in energy consumption mix up to 30 percent in 2050 while reducing coal’s share from 58 percent of total energy consumption mix in 2020 to 17 percent in 2050,” reads the report.
The report reveals that transition to gas use in residential and
commercial sectors is making progress on the back of city gas
network expansions, but the biggest challenge for China is
substitution of coal with natural gas in power sector and to a
lesser extent in the industrial sector. Competitiveness of
coal-fired power generation over gas means it will be an uphill
task to break away from coal in power sector and increase the use
of gas massively unless there are strong incentives to discourage
coal use.
Overall, China's natural gas production has increased from 174 Bcm (6.1 Tcf) in 2019 to about 220 Bcm (7.8 Tcf) last year, according to the International Energy Agency (IEA). IEA projects China's domestic gas production to reach 230 Bcm (8.1 Tcf) this year.
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