Oxford Institute for Energy Studies / by Xin Li
Natural gas is expected to provide over 10% of China’s total primary energy consumption in 2020, which is a significant increase from 6.2% in 2014. A diverse range of factors can have impacts on China’s gas demand, including resource endowment, gas-access-rate (infrastructure), industry structure, urbanization, income, gas and alternative energy price, environmental awareness, government priorities, seasonal weather variations and so on. These factors can have different impact on the sectoral gas consumption at different locations. In order to understand the impact of these drivers on gas production and consumption of different provinces in China, we conduct case studies in five provinces, including the wealthy regions (Guangdong and Beijing), the gas producing regions (Sichuan and Shaanxi), and other regions (Shandong).
We found that energy consumption growth in China is likely to remain moderate in the next decade. The role that gas can play is likely to change from taking a share of the growing demand to replacing the existing energy supply from other sources (mainly other fossil fuels). In general, such replacement will depend on several factors, such as the relative price levels of gas compared to alternative energy sources, the environmental impacts, and whether there will be a sufficient and secure supply. At the sectoral level, one of the main factors that determine gas consumption in different regions is the structure of the regional economy. A regional economy where industry represents a higher proportion of total GDP tends to use a higher proportion of gas in industry, though its share in total gas consumption has been declining; whilst for a regional economy dominated by services, the use of gas in the residential and commercial sectors is more significant. Residential gas consumption is growing in most regions with the improving gas infrastructure. Together with the growing trend of urbanization, residential consumption represents a significant opportunity for the future growth of gas, especially in the wealthy coastal regions. Furthermore, power and heating use of gas is expected to grow in coastal regions due to government policies on limiting the use of coal in power generation and the increasing differences between peak and valley power demand.