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China's Natural Gas Development Situation and Outlook for 2023

Currently, the world is undergoing its third energy transition from high carbon to low carbon and from fossil fuels to renewable energy. In the process of building a diversified energy structure for common development, fossil fuels, mainly oil and gas, will continue to play a vital role in the long term. Natural gas, in particular, with its multiple advantages of flexibility, cleanliness, stability, and efficiency, plays an essential role in replacing high-pollution fuels and co-developing with renewable energy sources.

In 2022, China accelerated its oil and natural gas production, accounting for 52.4% of the equivalent oil and gas production, further solidifying its foundation for stable oil and gas growth.

Continuous Growth in China's Natural Gas Supply and Demand

The peak growth of natural gas reserves continues, with an increasing proportion of unconventional resources. China's natural gas resources amount to 172 trillion cubic meters, providing a solid resource base. However, exploration is still in the early to middle stages, with low overall discovery levels. Since 2000, China has maintained peak growth in natural gas reserves, with an average annual addition of 732.8 billion cubic meters of proven natural gas reserves. As of the end of 2021, China's cumulative proven reserves amounted to 17.05 trillion cubic meters, with conventional gas accounting for 53%, tight gas 32%, shale gas 11%, and coalbed methane 4%. While the scale of newly proven reserves is significant, they are primarily low-quality reserves from unconventional and deep layers.

Natural gas consumption in China remains robust, and external dependency has been effectively controlled. In 2018, China produced 160.1 billion cubic meters of natural gas with an apparent consumption of 280.3 billion cubic meters, resulting in a natural gas external dependency of 45.3%. In 2022, China produced 220 billion cubic meters of natural gas, with an apparent consumption of 366.3 billion cubic meters, reducing the external dependency to less than 41%. Over the course of four years, with an increase of 86 billion cubic meters in natural gas consumption, the external dependency decreased by over 4%, mainly due to the rapid growth in domestic natural gas production. During these four years, domestic natural gas net additions totaled 60 billion cubic meters, defying most experts' predictions of dependency increases.

In the future, China's policy focus on increasing reserves and production will not change, and the development of the natural gas industry will be vigorously promoted. Natural gas will serve as a bridge for achieving green transformation, and the development of unconventional natural gas will be a major driving force for increasing reserves and production.

Natural gas development promotes energy structure transformation. Compared to the global average, China's proportion of natural gas consumption in primary energy consumption is relatively low. However, China's energy structure is unique and not directly comparable to foreign counterparts. The proportion of natural gas in primary energy consumption increased from 4% in 2010 to 8.9% in 2021, more than doubling in ten years. Absolute consumption increased from 95.8 billion cubic meters to 372.6 billion cubic meters, nearly quadrupling.

Outlook for Natural Gas Development

As the world adjusts its energy structure and develops clean energy, natural gas becomes a crucial component of sustainable energy. Its diversity, cleanliness, efficiency, and safety are the main reasons for its widespread use. Therefore, the market prospects and development trends of natural gas are still worth monitoring.

Firstly, from a global perspective, the world's energy structure is shifting toward sustainability, and natural gas is an essential part of this transition. According to the International Energy Agency (IEA), global energy demand will increase by 25%, and natural gas is expected to be one of the fastest-growing energy sources by 2025. Additionally, advancements in gasification and liquefaction technologies are further enhancing the affordability and accessibility of natural gas.

Secondly, from a domestic perspective, China, as one of the world's largest consumers of natural gas, has significant market potential. With the advancement of new energy and clean energy policies, along with the ongoing shift from coal to gas and coal to electricity, the space for China's natural gas market is expanding year by year. Moreover, technologies for efficient natural gas utilization are maturing, and applications such as natural gas hydrogenation and natural gas power generation will receive broader promotion and application.

Finally, from the perspective of technological innovation and strategic cooperation, countries are actively researching and developing new technologies for natural gas. This includes technologies to increase gas recovery rates, enhance gas mobility, and promote the integration of natural gas with emerging areas such as green chemicals and biomass conversion. In addition, countries are actively engaging in international strategic cooperation in the natural gas sector to expand production, supply, and distribution.

In summary, natural gas, as a vital component of sustainable energy, has a promising market outlook and development trend. In the face of increasingly severe global climate change, the cleanliness and efficiency of natural gas have made it a key enabler of widespread use. Therefore, it is foreseeable that natural gas will continue to play an important role in energy worldwide.