Largest Chinese energy major outlines plans to boost natural gas with shale output and LNG

Wednesday, 12 June 2019
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China National Petroleum Corp., the largest Chinese oil and gas company, said it planned to ramp up production of domestic natural gas to meet more than 50 percent of its primary energy output by 2020 to support the clean-air policies that have also boosted the need for LNG and pipeline imports.

“Domestic natural gas output is expected to reach 55 percent of domestic output by 2025,” said a CNPC statement.

The company, whose Hong Kong-listed subsidiary is PetroChina, said its natural gas production reached 138.02 billion cubic metres last year, of which 109.37 Bcm was produced in China, a year-on-year increase of 5.9 percent.

CNPC said it had also increased imports of overseas pipeline natural gas and LNG, while striving to further improve its own production capacity in the coming years.

The National Development and Reform Commission in May 2019 released new oil and gas liberalization measures to require facility operators to open up access to their oil and gas infrastructure to free up the flow of natural gas.

The new measures follow the government's announcement earlier in 2019 that it plans to establish a national pipeline company as part of China’s move to accelerate the opening up of its domestic oil and gas markets and to extend the gas network to provide a nationwide alternative to coal.

These measures are all part of the clean-air policy that will strive to replace coal use with natural gas in the domestic market.

This energy reform comes as the start of Russian supplies from the “Power of Siberia” natural gas pipeline is scheduled to start in December 2019.

CNPC and Russian company Gazprom have signed a 30-year agreement for Russian gas to be supplied via the eastern route, the “Power of Siberia” gas pipeline, and would amount in volumes of 38 Bcm per annum.

CNPC's pipeline contract with Gazprom is in addition to its stake in the latest Russian LNG export project, the Yamal plant on the Arctic coast of Siberia. Yamal is operated by the second-largest Russian natural gas company, Novatek.

The “Power of Siberia” pipeline is around 97 percent complete with more than 2,000 kilometres now installed and connected in the section running from Chayandinskoye, the gas fields centre in the Russian Far East, to the Chinese border in the Amur Region.

CNPC also said that its shale-gas production in the southwest province of Sichuan reached 4.27 Bcm in 2018, up 40 percent compared with the previous year and it will be further developed for purposes of national energy security.

The daily shale-gas output in southern Sichuan has reached 20.11 million cubic metres, a year-on-year increase of 119.3 percent.

The CNPC statement cited CNPC Chairman Wang Yilin as also saying the emissions from energy output and use had declined.

He said emissions of ammonia nitrogen, sulfur dioxide and nitrogen oxides decreased by 7 percent, 7.6 percent and 7.2 percent respectively year-on-year in 2018.

The company said it would invest another 31.9 billion yuan ($4.6 billion) in the 2019-2020 period to strengthen pollution prevention and boost the nation’s transformation to lower carbon emissions.

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