China’s Natural Gas Price Dilemma

May 17, 2011 | 00:00

China’s Natural Gas Price Dilemma

As the Chinese government began making clean energy sources and energy efficiency a priority in recent years, the role of natural gas has become increasingly important. The Chinese government’s 12th Five-Year Plan put a particular emphasis on the use of clean energy, including natural gas.

While natural gas is traditionally not a main source of energy, China expects that its consumption of gas will increase from current 3.8 percent to 10 percent by 2020,2 as it plans to cut emissions and heavy reliance on coal. In 2010, it imported nearly 15 billion cubic meters (550 billion cubic feet) of natural gas and it projected to increase its imports in coming years, primarily from Central Asia, Russia and through shipments of liquefied natural gas (LNG).3 According to the former president of the China National Petroleum Corporation (CNPC), Jia Chengde, China’s demand for gas may reach 150 bcm (5296.61 bcf) in the next three years.4 While China’s domestic production of gas has been growing exponentially, as illustrated in a graphic below, the country’s rising consumption made it a net importer of natural gas since 2007. As China’s potential to produce domestic unconventional shale gas and coal bed methane spurred its government to boost investment to develop these resources, the rising levels of gas demand would necessitate continued imports.

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