China Expected to Step Up Use of Natural Gas

(Beijing) — China is getting hungry again for natural gas.

The country’s consumption of natural gas is expected to grow by 8.1% annually from 2015 to 2030. That’s considerably higher than what is expected of global demand, which is forecast to grow at 2.1% annually, according to a report from a think tank under China’s top oil producer, China National Petroleum Corp. (CNPC).

China’s demand for the fuel was sluggish in recent years due to weakening economic growth and excess capacity in downstream sectors, such as chemical and power generation. Falling international oil prices also made natural gas less appealing.

The renewed interest in natural gas reflects the government’s stepped-up efforts to tackle China’s serious air pollution, the report said.

Natural gas is much cleaner than coal, which accounts for 60% of China’s energy sources, and oil. Coal is a top contributor to greenhouse gases and air pollution — both of which Beijing has vowed to curb. Carbon emissions from burning natural gas are 59% those of coal and 72% those of oil.

In 2015, natural gas accounted for about 5.9% of the country’s energy consumption. The government wants that to reach 10% by 2020 and 15% by 2030.

Domestic consumption of natural gas is estimated to reach 620 billion cubic meters by 2030, before growing further to hit 750 billion cubic meters in 2050, according to the report published earlier this week.

In the first half of 2017, domestic natural gas consumption soared 15.2% year-on-year to 114.6 billion cubic meters, compared with 8% in the full year of 2016 and 3.7% in 2015, which was the lowest growth rate in a decade, according to the think tank’s figures.

The rapid recovery came after the government stepped up environment protection efforts, said Duan Zhaofang, a senior researcher at CNPC’s think tank.

In July 2016, the government began to pressure local officials who had been slow to curb pollution in their areas. As of Tuesday, the central government had sent supervisors to all provincial-level regions to review local authorities’ performance in fighting pollution. The assessment results will be used as a key consideration in determining whether officials are promoted.

“If the strength of environment-protection policies is maintained, there is no big problem reaching the annual average growth rate of 8.1%” for natural gas consumption, Duan said.

However, she also pointed out uncertainties, such as the construction of infrastructure facilities and potential increases in the price of natural gas, may weigh on the use of the energy source.

The CNPC think tank predicts China’s demand for coal will fall to 2.58 billion tons by 2050 — 67.5% of its consumption in 2015. It also projects the country’s oil consumption will decline after peaking at 690 million tons in 2030, which by then will represent 14% of the world’s total crude oil consumption.

Contact reporter Fran Wang (fangwang@caixin.com)