China outlines natural gas focus in draft 13th Five Year Plan

23 September 2014 | Ludovic Aldersley, ICIS LNG Markets Reporter

China has outlined several development focuses for its natural gas industry in drafts of its 13th Five-Year Plan (FYP) from 2016 to 2020, the director of the country’s National Energy Administration, Wu Xinxiong, said at an energy planning conference in Beijing.

The 13th FYP, which will likely be approved by the National People’s Congress at its annual session in March 2015, will keep the development of natural gas as a “priority” within the country’s energy planning, Wu said.

Building on a natural gas consumption target of 230 billion cubic metres (bcm)/year by 2015 that it stipulated in its 12th FYP, China will continue to push away from coal-fired power generation towards a cleaner, more gas-fired electricity grid.

Domestic gas production is expected to increase and new targets will take into account expected breakthroughs in fresh exploration and exploitation of shale and offshore resources.

By 2020, unconventional gas production from shale and coalbed methane is expected to be 30bcm/year, Wu indicated.

China’s four major gas import channels – in the northwest, northeast and southwest of the country as well via offshore – would also all benefit from enhancements, while more gas storage sites around the country would improve energy security, Wu added.

Initial reforms regarding the construction and operation of oil and gas pipelines as well as power grids would be pushed forward, Wu said.

One non-LNG terminal operator has already imported its first cargo via a PetroChina terminal in the second half of 2014.

Aside from the reforms regarding ownership and access to infrastructure, China also wants to open up energy price formation to be “gradually determined by market forces”. This would apply to the price of natural gas at the wellhead as well as the end sales price and across the electricity sector, according to Wu.

The move to encourage more gas utilisation in China can, however, appear at odds with reforms that would remove subsidies and increase prices. Wholesale prices of gas for non-residential users have already been adjusted upwards this month and in July 2013. Power companies using gas have recorded thin or negative margins as a result of these rising costs, according to ICIS China.

If gas loses economic attractiveness compared to other fuels, it may become harder to achieve the gas growth planned by the authorities.

Research from ICIS China shows that gas consumption may fall short of the current 230bcm/year FYP target, with consumption estimates instead reaching 205bcm/year by the end of 2015. 


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