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China’s 2014 energy targets boost role of gas in fuel mix
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China’s continuing drive to reduce the share of coal in the nation’s energy mix is boosting the prospects for natural gas and renewable energy sources, according to analysis just published by IHS Energy Insight. Beijing-based analyst Olivia Boyd comments that while the 2014 energy targets and policy priorities recently announced by the National Energy Administration (NEA) “do not contain any significant deviations from past policy announcements” they do “in some cases reflect an intensification of previously announced targets”.One example of this intensification is the target to reduce the share of coal in the energy mix from 67% in 2012 to 65% in 2014. This, says Boyd, “represents an acceleration of previous plans, which envisioned coal coming down to 65% of total energy consumption by 2015”. Reducing coal consumption growth has become a priority for the government because it has come under increasing pressure to address the negative environmental effect of coal use, particularly air pollution.
“In the wake of record-breaking air pollution levels in major coastal cities such as Beijing and Shanghai in 2012/13,” says Boyd, “the government has stepped up its programme of switching coal-fired capacity to natural gas, with priority sectors including residential heating, industrial boilers, and power generation.”
In addition to capping coal consumption, China has enacted among the world’s strictest nitrogen oxide, sulphur dioxide, and particulate emissions limitations for the electricity sector and industry.
Confronting natural gas shortages
“These policies,” says Boyd, “aimed at controlling environmental pollution, have accelerated both the growth of natural gas consumption and the need to ramp up domestic supply, pipeline and LNG imports, and gas transmission infrastructure, as natural gas shortages have recently forced the government to temporarily scale back some of its coal-to-gas switching ambitions.”
“These policies,” says Boyd, “aimed at controlling environmental pollution, have accelerated both the growth of natural gas consumption and the need to ramp up domestic supply, pipeline and LNG imports, and gas transmission infrastructure, as natural gas shortages have recently forced the government to temporarily scale back some of its coal-to-gas switching ambitions.”
In the upstream sector, the target is to increase gas production to 131 Bcm, up by an ambitious 12% on 2013, with a focus on increasing exploration activity and ramping up production from China’s northwest and the Erdos Basin, Bohai Bay, Sichuan and new offshore developments, such as CNOOC’s deep-water developments in the Pearl River Basin.
The government hopes that shale gas will contribute a growing share of production, but its original shale gas target of 6.5 Bcm of production in 2015 is unlikely to be achieved. “The government clearly expects 2014 to be the year that China’s shale gas programme sees a significance breakthrough,” says Boyd. “The NEA has set a shale gas production target of 1.5 Bcm, far higher than 2013 production levels of just over 200 MMcm.”
Even 1.5 Bcm would represent only a tiny proportion of China’s current gas demand – around 1%. That said, BP, in its recent Energy Outlook 2035, comments that it sees China as “the most promising country for shale growth outside North America, accounting for 13% of world shale gas growth . . . by 2035”. Read on...
