Demand expected to grow even as nation looks to scale back hydrocarbon use
China will need a paradigm shift in its energy consumption — from coal to natural gas in the short term, and renewables over the long run — to live up to its commitment to reach peak carbon emissions by 2030 and carbon neutrality by 2060.
Gas demand is expected to grow even as China moves to reduce its hydrocarbon use, along with its overall carbon footprint.
“Natural gas is the stabiliser and adjuster in China’s pursuit of low-carbon economy, which will be aggressively developed alongside renewable energy such as wind and solar,” said Huang Weihe, a member of the Chinese Academy of Engineering, who served as vice president of China’s largest oil and gas company, PetroChina, in 2008.
Speaking at the International High-Level Forum on Green & Low-Carbon Energy Revolution, held in Beijing in August, Huang said gas fits into China’s strategy to move away from a coal-dominated energy mix, improve air quality and pursue low-carbon development.
Conservation efforts will cap the country’s total energy demand at 6 billion tonnes of coal equivalent by 2030, when coal will account for 42.8% of the total, oil 18.4% and gas 12%, with 26.8% of demand filled by renewable energy.
However, gas demand will continue to grow until reaching plateau at 550 billion to 650 billion cubic metres per annum by 2040, when it will account for between 12% and 15% of the country’s total energy demand mix.
“After that, demand will dwindle to 350-500 Bcm per annum by 2060, when it will account for 9% to 14% of the total energy mix,” he said, adding that renewables will play a key role in meeting China’s energy demand over the long run.
A recent report by the National Energy Administration shows China consumed 369 Bcm of gas last year, up by 12.5% year on year, accounting for 8.9% of total energy demand.
Chinese oil companies will step up natural gas exploration in response to the government’s call to boost energy independence, especially at a time of rising geopolitical tensions, Huang said.
The country has regarded domestic production as the cornerstone of its gas supply mix and is unlikely to allow imports to account for more than 50% of total supply in the future. Of last year’s 369 Bcm of gas consumption, 45.5%, or 168 Bcm, came from imports.
Domestic gas production will peak at 320 Bcm by 2040 before going down to 235 Bcm by 2060. Of the total production at peak, 118 Bcm to 150 Bcm will come from onshore fields, 117 Bcm to 158 Bcm from offshore fields, and the remainder will be imports.
China is expected to increase natural gas reserves by between 500 Bcm and 900 Bcm per annum until 2060 with producible reserves standing at 11.7 trillion to 13.6 trillion cubic metres over the same period.
China is looking at the onshore Ordos, Sichuan and Tarim basins as well as the offshore basins of northern and southern China as the major playing fields for natural gas exploration and development, with a focus on tight gas and shale gas, Huang said.
Natural gas consumption will increase as industrial facilities and power generation shift from coal to gas.
Such a shift could reduce sulphur dioxide emissions by 100%, carbon dioxide by 40% and nitrous oxide by 50% as compared with coal, Huang said.
Power generation
By 2025, China’s gas-based power generation will reach 150 gigawatts, which will require 122 Bcm per annum of natural gas.
Gas-based power generation capacity will reach 330 GW by 2040, in part due to the tightening environmental policies and the need for more peak-shaving power, driving gas demand up to 308 Bcm per annum.
Demand for gas used either as fuel or feedstock will continue to grow until 2040, then start to taper off. Gas demand for industrial use will peak at 210 Bcm per annum and drop to 173 Bcm by 2060.
The trend means China will have to import more gas to bridge the gap between demand and domestic production. It is already the world’s largest gas importer.
By 2060, pipeline gas imports from Russia and central East Asian countries will exceed 100 Bcm per annum while liquefied natural gas imports from the Middle East, Africa and Russia will hit 150 Bcm, as compared with 59.1 Bcm of pipeline gas imports and 108.9 Bcm of LNG imports last year.
Infrastructure
In the meantime, the country plans to aggressively debottleneck gas infrastructure, aiming to expand the gas pipeline network to between 170,000 and 200,000 kilometres by 2040, from 120,000 kilometres now — enough to supply up to 3 Bcm per day of gas.
China is also in the middle of building LNG import hubs in Bohai Rim in the north, the Yangtze River Delta region in the east and the coastal area of the southeast.
The three hubs will raise LNG import handling capacity to between 200 million and 240 million tonnes per annum by 2040, from 101 million tpa now.
Of the total, Bohai Rim will handle 90 million tonnes of imported LNG by 2040, the Yangtze River Delta region will handle 80 million tonnes and southeastern coastal areas will receive 70 million tonnes.
The LNG terminal utilisation rate will decrease to between 50% and 55% by 2040, from 70% now.
By 2040, China will build seven gas storage bases with total holding capacity of 90 Bcm, including 60 Bcm for underground cavern facilities. LNG storage tanks with capacity of 30 Bcm will be established along the coastal regions.
