In the first half of this year, China’s gas demand saw a 16% year-on-year increase.
This was led by strong power and industrial demand, Miaoru Huang, Wood Mackenzie’s Research Director, APAC Gas & LNG, said.
Under performing hydropower in southwest China, tight coal supply coupled with high coal prices across the country, and high summer temperatures, all supported gas-fired power generation.
Export-led economic growth and domestic consumption recovery benefited overall energy demand, including natural gas.
So far, China’s gas demand has exceeded expectations and it is now expected that its gas demand will increase by 13%, or 42 bill cu m, year-on-year in 2021.
Huang said that demand is expected to grow by 5.5% a year on average between 2020 and 2030. Post-2030, growth will decelerate but by 2050, China’s gas demand could reach around 660 bill cu m.
To meet its rising demand, China has been boosting domestic production, de-bottlenecking infrastructure, diversifying import sources and introducing market-oriented reforms.
Gas storage facilities and flexible supply sources like LNG will be key for peak shaving. By 2050, RCH demand could account for 40% of total gas demand.
China has also been boosting its domestic production of natural gas to meet demand. In the Long term, integrated renewables and storage projects will pose the ultimate threat to gas power, Huang said.
The transport sector makes up the remaining segment, and its gas demand will mostly come from from LNG-fuelled heavy-duty trucks.
China’s national oil companies (NOCs) have discovered 6.85 trill cu m of natural gas resources in the past decade, some 45% of total incremental resources since the the country was founded as it is today.
Growing gas demand will call on more imports to bridge the gap between demand and domestic production. The country is already the world’s largest gas importer. In 2020, pipeline gas imports totalled 48 bill cu m, while LNG imports stood at 93 bill.
In the first half of this year, China overtook Japan as the world’s largest LNG importer, and Huang expected China’s full year LNG imports to also exceed that of Japan.
Despite higher flows of pipeline imports, LNG will be crucial to meeting China’s gas ambitions. Until storage capacity develops sufficiently, LNG is more flexible than pipeline gas to counter demand and production uncertainty.
In southern China, which is far away from onshore gas-producing basins, LNG will serve both base and peak demand. In northern China, LNG will remain an important peaking source. Huang forecast that LNG demand will increase from 67 mill tonnes in 2020 to 112 mill by 2030 in the base case.
China has pledged to reach carbon neutrality by 2060. To achieve that ambition requires a tectonic shift in its energy mix, technology and metals supply chains.
In the net zero scenario, all hydrocarbons would need to be reduced. Yet, Huang said that the consultancy saw gas demand being more resilient than coal and oil demand.
Before 2030, gas demand growth will be largely intact compared with the base case. Post-2030, gas demand is expected to plateau and a gradual decline begins.
Nevertheless, gas demand in 2050 will be higher than current levels, especially as gas can contribute to China’s transition to net zero in hard-to-de-carbonise sectors and through the form of blue hydrogen, she concluded.