At the moment natural gas is a very small player – in relative terms anyway – compared to coal and crude oil, which are running at about 67% and 19% respectively, while natural gas is at just over 5.2%.
However, with pollution a major problem the Chinese government is pushing for natural gas and non-fossil fuels such as solar, wind power and nuclear to grow.
Bloomberg analyst Grace Lee told the Excellence in Oil and Gas conference that part of the problem facing natural gas in China was the lack of upstream investment.
“China is still dominated by state owned companies such as Petrochina, CNOOC [China National Offshore Oil Company] and Sinopec,” she said.
However, Lee said the situation was about to change, with the Chinese government prioritising gas use.
That is one of the benefits of having a planned economy, she said.
For one thing, the government has prioritised the use of coal seam gas for power generation.
This will serve a dual benefit for some China’s very gassy coal mines by removing the problem that has caused numerous mine blasts there.
“The government is trying to hike natural gas targets up 10.5%,” Lee said.
“The government is also trying to increase exploration for shale gas.
“The prerogative is to reduce pollution. Most of that pollution comes from coal-fired power generators.”
Lee said alongside trying to grow the use of natural gas, the Chinese government was also putting pressure on those coal generating stations to become more efficient.
“By 2015 the government wants gas consumption up to 230 billion cubic metres,” she said.
“That will be good for the Australian market because China imports a lot of its gas from Australia.”
However, Australia has competition there because a lot of China’s gas also comes from
Qatar. It also has the benefit of being able to look to import its gas via pipeline from the likes of Kazakhstan, Kyrgyzstan and Russia. After all, LNG costs more to import than piped natural gas.
Lee said China would dominate the LNG market but Japan would also remain a huge importer of LNG.
However, China is not going to rely on imports alone for its gas. Not with its large unconventional resources.
“China has large and ambitious plans to develop its unconventional gas,” Lee said.
“If China can produce its unconventional resource it will have huge ramifications for the energy market.
“China wants to achieve initial production of 6.5Bcu.m by 2015 and be up to 60-100Bcu.m by 2020.
“Many think that’s ambitious but the government has published those figures anyway.”
Part of the reason for thinking the Chinese ambitious lies in the geological challenges they will face to access their gas.
One of the Chinese’s large deposits lies in mountainous terrain. Certainly not as easy to drill as the plains where much of the shale gas behind the US energy revolution is found.
Sichuan Province, where there are other major gas deposits, is prone to earthquakes.
Which could again mean more gas from Australia.
