Save for later Print Download Share LinkedIn Twitter Chinese state companies are more bullish than ever on gas, at least in the short to medium term. Gas has slowly but surely increased its share of the energy mix over the past decade on the back of coal-related pollution concerns. But last year's announcement by President Xi Jinping that China will peak carbon emissions before 2030 and become carbon neutral by 2060 has prompted the three state giants to jump even more heavily on the gas bandwagon.The companies, tasked with ensuring stable energy supplies while embracing China’s energy transition, are keen to depict gas as a major transition fuel. “PetroChina will leverage its advantage: We believe gas will always have a very important role to play in our new energy developments and our efforts to achieve carbon neutrality,” Chairman Dai Houliang said on a recent first-half earnings call.Add in the need to meet another Xi priority -- increase energy security at a time of growing geopolitical uncertainty -- and they are drilling for, and producing, as much gas at home as they can. The firms' Hong Kong-listed subsidiaries all reported strong increases in first-half domestic output. PetroChina, the listed arm of China’s largest oil and gas producer, China National Petroleum Corp., saw production rise 6.7% year on year to 61.2 billion cubic meters (2,159.5 billion cubic feet). Sinopec Corp.’s output jumped 13.7% to 16.5 Bcm, while China National Offshore Oil Corp. (CNOOC) Ltd. boasted an 11.7% increase to 6.5 Bcm.Chinese gas demand rebounded in the first half of 2021 on the back of economic recovery and last year's low base, helping lift global demand. Economic planners at the National Development and Reform Commission put apparent consumption at 182.7 Bcm, up 17.5% year on year, the strongest growth in three years. Apparent consumption in July was 17.1% higher.Sinopec acting Chairman Ma Yongsheng forecasts full-year consumption of 370 Bcm (36 billion cubic feet per day), up from 326 Bcm in 2020. The company expects to produce 34.5 Bcm, up 13.5% from 2020, versus the 12.2% it earlier predicted.PetroChina has upped its forecast for Chinese demand growth from 5%-7% to 7%-9% annually from 2021-25, lifted by carbon-neutrality goals.Rebounding global LNG demand, with No. 1 buyer China at the forefront, has driven up spot prices . PetroChina expects prices to average $11.30-$11.70 per million Btu this year before falling to $6-$10/MMBtu next year and beyond.With Chinese gas prices yet to be fully liberalized and industrial and residential prices to converge, gas imports are weighing on balance sheets.The solution? More domestic production, according to PetroChina and Sinopec. They also mentioned more low-cost gas, which for PetroChina likely means more piped imports from Russia.Sinopec reaffirmed objectives to boost output by more than 10% per year in 2022-23. CNOOC aims to grow gas' share of its portfolio from 20%-21% to 30% by 2025 and 50% by 2035.Sinopec and PetroChina have pledged to be carbon neutral by around 2050, a decade before the national target. CNOOC has not set a deadline, but said last month it wants half its earnings to come from non-fossil fuels by 2050.It's too early to say whether the targets are achievable. The firms are still developing new energy strategies that will include solar, wind, geothermal, hydrogen and, at least for PetroChina and CNOOC, gas-powered projects.But these will definitely require a dramatic move away from gas long term.CNPC said earlier this year that China’s gas demand would have to peak by 2030 at 585 Bcm to meet emissions targets. But it subsequently said it sees apparent consumption at 600 Bcm by 2035 , possibly acknowledging a gap between ambitions and reality. Wood Mackenzie thinks demand will peak at 550 Bcm/yr from 2035-40.