CHINA WANTS MORE GAS
Chinese demand for natural gas is expected to almost double in the next five years as the country aims to use cleaner fuels to clear its cities' smog-filled skies, according to the International Energy Agency.
The power, industrial and transport sectors will drive overall Chinese gas demand to 315bn cubic meters (bcm) in 2019, an increase of 90 per cent from 2013, the watchdog backed by wealthy nations said in its annual medium-term gas market report released on Tuesday.
China is seeking alternative energy sources to fuel its growth as widespread use of coal for heating and power generation, particularly in northern china, has shrouded Beijing and other cities in toxic smog.
"Environmental concerns are now the dominant factor driving demand for natural gas. People are no longer willing to live in clouds of pollution every winter," said Anne-Sophie Corbeau, senior gas analyst at the IEA. "The government is now taking every way to achieve its target of shifting to cleaner fuels."
After a decade of negotiations China struck a $400bn gas supply deal with Russia last month as part of a longer term strategy to raise natural gas imports via pipeline and liquefied natural gas (LNG). The country, which became a net gas importer in 2007, is also expanding domestic reserves and establishing a wider domestic natural gas network and storage capacity.
Leading Chinese companies are involved in projects to export LNG – natural gas that has been superchilled into liquid form for easier transportation – from countries such as Canada and Australia. LNG capacity could double by 2020 to at least 90 bcm, the IEA said.
Although China will remain a significant importer, half of its new gas demand through to 2019 will be met by domestic resources. Chinese production is expected to increase 65 per cent to 193 bcm in 2019.
"There is still uncertainty about how successful China will be in developing its own unconventional gas resources," said Thierry Bros, European gas and LNG analyst at Société Générale. "If China is able to unlock its shale gas resources, which is linked to the technological capabilities, there could be a huge shift in future global demand."
The Chinese government anticipates boosting the share of natural gas as part of total energy consumption to around 8 per cent by the end of 2015 and 10 per cent by 2020.
For the period to 2019, the boost in expected Chinese demand will offset slowdowns in other regions such as Europe, amid low power demand growth and robust policy support for renewable energy, the IEA said. It forecast global demand to rise 2.2 per cent over the next five years, compared with the 2.4 per cent previously expected.
LNG will meet much of global demand and is expected to grow 40 per cent to 450 bcm by 2019, the IEA said. Producers in the US, Canada and Australia are the most likely to benefit.
But the watchdog warned that higher LNG prices threaten to crimp demand, particularly in Asia. "Many countries are increasingly unwilling, or unable, to afford these supplies – and that could open the door to coal," it said.
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