NATURAL GAS IN CHINA

China was one of the earliest countries that began using natural gas, but it has lagged behind developed countries since the mid 20th century. As it becomes the world's second largest economy, the production and consumption of natural gas has become an increasingly crucial component to China's growth and energy needs.

China's Natural Gas Reserves
China's proven natural gas reserves have grown by 500 billion cubic meters annually since 2000. Close to 766 billion m3 of natural gas was discovered in 2011, up 29.6% from the year before. It is projected that China's proven natural gas reserves will amount to six trillion m3 by the end of 2020.

China's Natural Gas Production
China's natural gas production has grown 15% annually since 2000 and has become one of the world's largest producers. It produced 101 billion m3 of natural gas in 2011, up 7.3% from the year before. It was the first time annual natural gas output cracked the 100 billion m3 mark. Xinjiang, Sichuan and Inner Mongolia are major producers. It is projected that China's annual natural gas production will peak at 170 billion m3 around 2015 and decline to 120-150 billion m3 by the end of 2020.

China's Natural gas Consumption
China's natural gas consumption rose 20% to over 130 billion m3 in 2011, fueled by demand from civilians and power plants but accounting for just 4.6% of aggregate energy consumption (versus 23.8% global average). China was the world's fourth largest natural gas consumer in 2011 after the US, Russia and Iran. During the five years through 2015, China's natural gas consumption is expected to increase by 20 billion m3 per year, and to total 230-260 billion m3 per year by the end of 2015, of which 35-40% is expected to be imported. By the end of 2015, natural gas pipelines in China are expected to total 40,000km and natural gas storage depots are expected to store 20 billion m3.

Shale Gas In China
China is stepping up the development of shale gas as a substitute for conventional energy. The central government said in August 2012 that it will subsidize every m3 of shale gas developed by RMB0.4. Nationwide shale gas output is expected to reach 6.5 billion m3 over the five years through 2015. The volume of shale gas in China available for extracting is expected to hit one trillion m3 by 2020, when shale gas output is expected to account for 8-12% of all natural gas output.

Pricing
Natural gas is generally underpriced in China as the resource is basically priced by the government. In late 2011, China allowed some provincial governments to set natural gas prices with upper limits to improve efficiency of the industry. China is working on the formulation of a nationwide pricing mechanism, including seasonally adjusted prices and a national natural gas exchange.


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