China triples down on natural gas to hit climate goals
Dramatic growth in domestic production, imports planned
SHUNSUKE TABETA, Nikkei staff writer
CHONGQING -- China looks to triple its natural gas supply by 2030 and equip more power plants to burn the relatively green fossil fuel, helping the country meet its ambitious emissions-reduction targets.
The government aims for a supply of 600 billion cu. meters by that year. This will involve more than doubling annual domestic gas production over the same period to 300 billion cu. meters and taking steps to enable imports of up to that amount each year, compared with 2016's imports of 70 billion cu. meters.
The country's gas consumption clocked in around 200 billion cu. meters in 2016, roughly matching potential supply. But plans to replace coal with natural gas in such settings as power plants and industrial boilers in China's polluted cities are seen raising consumption to between 450 billion cu. meters and 500 billion cu. meters by 2030. According to British energy giant BP, global natural gas usage will surpass that of coal by 2035, and China will outstrip the European Union and Russia to become the second-largest consumer of the fuel behind the U.S.
This shift in energy usage is part of China's plan to meet its commitments under the Paris climate agreement. Beijing has pledged to cut carbon dioxide emissions per unit of gross domestic product by 60-65% from the 2005 level by 2030, and plans to invest $6.5 trillion to meet that goal. Capital spending on the natural gas push will both create new business opportunities and support the global market for the fuel.
Companies such as state-owned Sinopec Group will bolster gas exploration in China's interior and increase output of shale gas, produced in Chongqing and elsewhere, to more than 100 billion cu. meters. Meanwhile, a pipeline network carrying gas to China from Turkmenistan and elsewhere in Central Asia will be expanded in 2020. A pipeline between Russia and China will begin operating in 2019, with expansions to be considered.
The country will also step up imports of liquefied natural gas. China had 15 LNG terminals at the end of 2016 with a capacity totaling around 50 million tons. That will be increased to 100 million tons in five years. The country currently imports around 30% as much LNG as Japan, but could draw level with the island nation depending on Japanese economic performance.
A trio of state-owned companies including China National Petroleum holds the bulk of the country's natural gas interests abroad. But the government has decided others, including private companies, need to get into the game to invigorate the gas sector.
ENN Group, a leading private-sector energy firm, was happy to comply, announcing in March 2016 that it would acquire an 11.7% stake in Australian oil and gas developer Santos for $750 million. Beijing Enterprises Holdings, whose subsidiaries include a municipal gas company in Beijing, agreed last November to pay $1.1 billion for a 20% interest in a Siberian oil and gas field owned by a unit of state oil company Rosneft.
CEFC China Energy will begin this year importing liquefied petroleum gas by rail from Kazakhstan, where the oil company holds natural gas interests. A company owned partly by China Zhenhua Oil, affiliated with the People's Liberation Army, agreed in April to buy Bangladeshi gas fields from Chevron of the U.S. for $2 billion.