Chinese Demand Could Peak This Decade

Copyright © 2021 Energy Intelligence Group

China's biggest gas company has dealt a blow to international suppliers with new forecasts that gas demand will peak much sooner than expected as the country turns to cleaner sources of energy. China National Petroleum Corp. (CNPC), now predicts that demand will peak at 585 billion cubic meters per year (56.6 billion cubic feet per day) by 2030 -- rather than its earlier forecast of 700 Bcm/yr in 2050. CNPC is forecasting demand at 353.8 Bcm for 2021, up from last year's 326 Bcm. The company revised down its forecasts after President Xi Jinping said last year he wants China's carbon emissions to peak by 2030 and for the country to be carbon neutral by 2060. For that to happen, CNPC says gas consumption will have to start falling next decade (WGI Feb.24'21). In the power sector, gas is more expensive than coal and most renewables, and produces more emissions than renewables. The company nonetheless sees room for gas to supplement renewables to meet peak power demand, and more optimistic industry insiders suggest that gas consumption could rise to 600 Bcm-650 Bcm/yr by 2030 as more coal-fired plants are shut. Sources in the electricity industry think that's unlikely, saying there are cheaper ways to meet peak demand. "It's not necessary to use gas," an industry analyst says, adding that hydro and thermal power, as well as energy storage could all be cheaper. A source at state-run Huadian, China's biggest gas-fired power generator, says there is definitely a role for gas in meeting peak demand, but thermal power can also be used, so "there is no need to build new gas power plants.” Hydrogen will also feature more prominently as state-run energy companies fall in line with the 2060 net zero target. CNPC rival Sinopec says hydrogen will play a central role in its energy transition planning. It wants its own emissions to peak before 2030 and to attain carbon neutrality in 2050, 10 years before the national goal. Sinopec is already the country's largest producer of hydrogen produced from fossil fuels, but intends to start manufacturing some carbon-free "green" hydrogen, using wind and solar power, by 2025. It also plans to build 1,000 hydrogen-refilling stations by 2025. More optimistic gas industry insiders believe increased use of blue hydrogen -- produced from gas with carbon capture and storage -- could bolster gas demand going forward. Blue hydrogen is cheaper than green hydrogen, "so the more hydrogen consumption, the more gas consumption,” a CNPC analyst says. “The development of hydrogen does not conflict with the development of natural gas. Hydrogen will not replace natural gas.” In line with this view, CNPC sources say China will build five more gas pipelines from Russia. Currently, there is just the 38 Bcm/yr Power of Siberia. Adding more pipelines has become a geopolitical priority for Beijing (WGI Apr.28'21). CNPC expects gas demand to grow by an annual average of 5.7% from 2021-25, down from 11.5% per year from 2015-20. China National Offshore Oil Corp. (CNOOC), the country's largest LNG importer, is more optimistic. It predicts that demand will grow by 6%-9% annually from 2021-25 before slowing to 4%-7% per year from 2026-30. It reckons demand will hit 602 Bcm in 2030 and peak by 2045. CNOOC expects the country to have at least 40 LNG import terminals by 2025 with combined capacity of 200 million tons/yr and for imports to top 100 million tons/yr by then. Staff reports China's Gas Consumption Mix 2021 2022 2023 2024 2025 Chemical Users 8.7% 8.1% 7.6% 7.1% 6.7% Industrial Users 38.6 38.4 38.3 38.3 38.4 Gas-fired Power Generation 16.5 17.5 18.4 19.1 19.4 City Gas Users 36.3% 36.0% 35.7% 35.5% 35.4% Source: Sinopec China's Energy Peak Demand Volume Year Previous Forecast Before Net Zero Target Natural Gas Peak Demand 700 Bcm/yr 2050 Total Energy Peak Demand 6 billion tons of standard coal 2035 Petroleum Peak Demand 970 million tons of standard coal 2030 Coal Peak Demand 2.9 billion tons of standard coal 2025 New Forecast Amid Net Zero Target Natural Gas Peak Demand 585 Bcm/yr 2030 Total Energy Peak Demand 5.98 billion tons of standard coal 2030 Petroleum Peak Demand 1.02 billion tons of standard coal 2030 Coal Peak Demand 2.8 billion tons of standard coal 2020 Source: CNPC China's Gas Consumption Forecast (Bcm/yr) 2025 % of Total

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