Major oilfields ramp up production to serve nation's low-carbon transition

Natural gas consumption in China is expected to rise this year as domestic economic recovery rapidly increases the domestic energy off-take, said experts from industry and policy think tanks.

China's demand for natural gas is expected to rise rapidly over last year, with annual consumption expected to climb at a rate of 5.2 percent to 7 percent to reach 385 billion to 390 billion cubic meters, according to a report by the Economics and Technology Research Institute in July.

City gas and power generation will be the primary drivers of growth, while the commercial sector, transportation and heating demand will also significantly contribute to demand for city gas, said the institute, which is affiliated with the country's largest oil and gas producer and supplier, China National Petroleum Corp.

Natural gas will play a pivotal bridging role in the energy transition in the country and demand will remain robust in the coming years as China vows to ensure sufficient energy supply amid its green energy transition, it said.

The institute expects gas demand in Asia will recover steadily this year, while the global gas market is expected to continue being influenced by the rebalancing of supply and demand in the European market.

China produced 220.1 bcm of natural gas last year, an increase of 6 percent year-on-year, surpassing an annual growth of 10 bcm for the sixth consecutive year. The government aims to keep reliance on domestic natural gas at more than 50 percent in the long term and use natural gas as a peak-shaving tool amid periods of high power demand.

The institute's forecast is in line with that of the National Energy Administration, saying in a report that the supply of natural gas in China is expected to increase mainly due to higher local production and an increased supply of pipeline gas from the China-Russia eastern route. Liquified natural gas (LNG) imports will also resume growth with increased flexibility to adapt to changes in supply and demand within the country, it said.

According to the institute, China has been stepping up natural gas output while accelerating the construction of natural gas infrastructure nationwide, including natural gas pipelines and storage tanks, driven by an overall recovery in the country's economy.

Domestic energy companies, including CNPC, China National Offshore Oil Corp and China Petrochemical Corp, or Sinopec, have stepped up domestic oil and gas exploration and exploitation in recent years to boost output while expanding international oil and gas exploration and trade to secure adequate energy supplies.

Major oilfields nationwide, including Changqing oilfield, China's largest oil and gas field located in Northwest China's Ordos basin — Daqing oilfield in Heilongjiang province and the Tarim oilfield in the Xinjiang Uygur autonomous region, have been stepping up production and supplies to ensure domestic energy security while facilitating the country's low-carbon energy transition.

CNPC said its oil and gas output hit new records in 2022, with natural gas output hitting 145.3 bcm. Natural gas accounted for 52.4 percent of the company's total production measured by oil and gas equivalent, it said.

Sinopec believes natural gas consumption in China will reach 620 bcm per year by 2040 and become the largest fossil energy source in the country by 2050.

China's oil and gas industry provided strong support for domestic economic growth last year despite the severe and complex changes in the international energy situation, said Zhou Xiwei, an economist with the institute's energy strategy research department.

Li Ziyue, an analyst with BloombergNEF, said against the backdrop of the global energy crisis, it is important for domestic oil and gas companies to step up efforts in upstream exploitation and exploration, while strengthening domestic gas production and long-term contracts, to reduce volatility and maintain price stability.

Domestic gas output will play an even more important role next year as gas imports become increasingly more uncertain and volatile amid European gas shortages, she said.