From this morning's The Australian.
"The government aims to have half of northern Chinese homes heated with “clean energy” — chiefly gas — by 2019, and 70 per cent by 2021.
Under the five-year plan, gas will produce 10 per cent of China’s energy by 2020, up from 5.9 per cent in 2015, with consumption rising through the five years from 167 billion cubic metres to 360.
The pace of China’s nuclear power growth is also accelerating. China already has 38 generation plants and is looking to add 50 per cent more capacity in 10 years.
The National Development and Reform Commission has temporarily lifted the bans on coal use in poor districts where gas is not yet available.
China has only limited domestic sources of gas, chiefly in its northwestern region of Xinjiang, far from population centres, and offshore. It pipes gas from Siberia, but that supply is limited.
Australia is surpassing Qatar to become the largest supplier of LNG, reflecting the situation globally. At the same time, the global oil and gas market is being shaken up by the massive new growth of production in the US, which the International Energy Agency expects will become the global market leader within the next decade.
The IEA also says that the proportion of LNG used globally will keep rising.
And despite the accelerating US role, transport costs will ensure Australian LNG remains competitive for Chinese buyers.
In the next few months Australian output will increase dramatically, with the Wheatstone, Ichthys and Prelude gasfields all coming on stream.
The gas price in China has doubled since September as demand has increased — overtaking the capacity of the energy distribution companies to provide production facilities and lay enough pipes — while supply has stayed tight.
“And it is just the start,” said Zhao Yang, an analyst at Zhongyu Information Technology in Shandong. “Shortages will continue through the winters for a couple of years.”
Industry is expecting China’s demand for LNG to keep growing until it peaks in 2030. “All major LNG suppliers to China will benefit from this,” she said, “and Australia’s role as the largest is expected to be consolidated.”
Qie Jing, at Sublime China Information, says gas typically supplies 15 per cent of the energy market in developed countries, so China’s demand is expected to keep growing for a long time.
The industry is moving towards shorter-term supply contracts, because prices linked to oil prices are fluctuating so much. They are essentially market-driven — there is no regulatory mechanism.
Gavekal analyst Yanmei Xie concludes about Xi’s “battle for blue skies” in northern China that “pollution cannot be reduced by political will alone”. The emissions are produced by a huge physical infrastructure of power plants and factories, which will have to be transformed cleverly if the pollution falls are to be sustained, or else economic growth will choke.
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