The newly issued "Natural Gas Utilization Policy" this year emphasizes the need to balance supply and demand, enhance demand-side management, boost production capacity, ensure stable supply, regulate prices reasonably, and strictly oversee project implementation. Industry experts believe that while this policy may help alleviate the current imbalance between natural gas supply and demand, the main challenge remains in transportation.
During China’s "Eleventh Five-Year Plan" for energy, natural gas has emerged as the fastest-growing energy source. Major oil companies such as PetroChina, Sinopec, and CNOOC have made significant progress in natural gas exploration and production. For instance, PetroChina discovered large reserves in Sichuan and Daqing, Sinopec found significant deposits in the northeastern part of Sichuan, and CNOOC explored deep-sea fields in the South China Sea. These developments have raised expectations that the country's natural gas supply-demand gap might gradually improve.
Yin Xiaodong, an energy analyst, noted that the main bottleneck in domestic natural gas supply is not due to low production but rather poor transportation infrastructure. Moving gas from resource-rich areas to high-demand regions like the southeast remains a critical issue. Although several long-distance pipelines have been built and are now operational, the growth of supply still lags behind rising demand. Future pipeline expansions are expected to significantly ease this imbalance.
However, Yin also pointed out that the new utilization policy is primarily a guiding framework aimed at preventing wasteful consumption, such as using natural gas for methanol or ethanol production in the chemical industry, and instead promoting its use in households. While this may help optimize usage, it won't directly address the existing supply-demand mismatch.
In August this year, plans for the second phase of the West-East Gas Pipeline were finalized. The second line is expected to transport 30 billion cubic meters of gas annually, starting construction in 2008 and completing operations by 2010. It will stretch from Xinjiang to Guangzhou, sourcing gas from Central Asian countries like Turkmenistan and Kazakhstan. With a total length of 6,500 kilometers—nearly double that of the first pipeline—it aims to meet the growing demand in southern China, where gas shortages are most severe.
Despite these efforts, industry insiders argue that even with sufficient domestic production and completed pipeline networks, LNG imports will still be necessary. Transporting gas from the northwest to the southeast can be costlier than importing LNG from Australia, making LNG a crucial solution to the current supply-demand gap.
Industry forecasts suggest that by 2020, natural gas demand in eastern China could reach 136 to 180 billion cubic meters, accounting for over 60% of the national total. Between 20% to 40% of this demand may be met through LNG imports. In recent years, CNOOC has signed agreements for three liquefied natural gas import terminals in Guangdong, Fujian, and Shanghai. By 2020, China is expected to import at least 60 million tons of LNG annually, equivalent to 80 million tons of oil. Additionally, CNPC plans to import 3 million tons of LNG from Australia each year, with Shell supplying 1 million tons and Woodside Petroleum providing the remaining 2 million.
While these measures offer hope, the transportation challenges persist, and as the saying goes, "far water cannot quench near thirst."
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