Natural gas output rises as clean energy efforts gain traction

Natural gas output grew at a faster pace in China last year with production rising to 150.9 billion cubic meters, up 6.6 percent from a year ago, according to the Ministry of Natural Resources.

Unconventional natural gas resources, like tight gas and shale gas, saw higher output last year and accounted for a third of the total natural gas production, according to an annual report on China's energy development released by the China Electric Power Planning and Engineering Institute, a research institute.

Production of shale gas alone exceeded 15 billion cubic meters, up 46 percent on a yearly basis, according to the report. Coal bed methane production reached 5.5 billion cubic meters last year, up 6.1 percent on a yearly basis.

According to BloombergNEF, a research firm, natural gas output is expected to see further traction in the subsequent years as the government is striving toward a cleaner energy mix.

Li Ziyue, an analyst with BloombergNEF, expects shale gas to be a next growth frontier for the natural gas industry in China. She estimated that shale gas will account for 30 percent of the total gas production in China by 2040.

China has been stepping up its investment in oil and gas exploration in recent years and invested a record 82.13 billion yuan ($11.76 billion) for the same in 2019, up 29 percent from the previous year, according to the Ministry of Natural Resources. Investment for the exploitation of oil and gas resources in the country rose to 252.71 billion yuan in 2019, up 24.4 percent on a yearly basis, the ministry said.

Industry experts aver that the continuous construction of gas pipelines, including the southern part of the China-Russia East Route, will improve energy security in the Yangtze River Delta region and help diversify natural gas sources.

Construction of the world's longest across-the-river pipeline, the southern part of the China-Russia East natural gas pipeline, from Hebei province to Shanghai, kicked off last week, according to China Oil& Gas Pipeline Network Corp, or PipeChina, the national pipeline operator. The line is expected to provide the region with 18.9 billion cubic meters of gas, or 30 percent of the yearly consumption of the region in 2019, when it reaches full capacity in 2025 through its 5,111-kilometer-long pipeline, it said.

The northern part was put into operation last year, and the middle part is expected to be completed by the end of this year.

"PipeChina is supposed to grant third-party access to pipelines to market players, which may incentivize more participants to join upstream development and LNG purchase," said Li.

With the delivered price of Russian gas expected to be cheaper than the long-term contracted LNG prices, BNEF estimates this could reduce the region's appetite for contracted LNG, in favor of Russian piped supplies, she said.

The China-Central Asia Gas Pipeline, running from the border between Turkmenistan and Uzbekistan, passing through Uzbekistan and Kazakhstan and linking up with China's West-to-East Gas Pipeline in Horgos of the Xinjiang Uygur autonomous region, has delivered over 19 billion cubic meters of natural gas to China during the first six months of this year, according to PetroChina West Pipeline Co.

With a total length of 1,833 km and a designed annual gas transmission capacity of 60 billion cubic meters per year, the pipeline has been in operation for 10 years. It had delivered 316 billion cubic meters of natural gas to China by the end of June, benefiting over 500 million people in China, including residents in the Hong Kong Special Administrative Region.

According to the ministry, newly added proven oil reserves saw year-on-year growth of 17.2 percent, reaching 1.12 billion metric tons, while new proven natural gas reserves declined 2.7 percent year-on-year to 809.1 billion cubic meters.