Business Society News on July 12th

The incremental demand in the natural gas market is mainly concentrated in three areas: urban gas, industrial fuel, and natural gas power generation. In order to ensure the sustainable and healthy development of the natural gas industry, it is necessary to steadfastly promote the reform of the entire industry chain, including natural gas mining rights management, separation of network and operation, coordinated imports, and market-oriented pricing, in the medium and long term. We must fully leverage the important role of natural gas as a bridge in clean and low-carbon energy, and gradually achieve the goals of optimizing energy structure and improving atmospheric environment.

1. Natural gas is the dominant fuel in the urban gas field, and urban gas maintains stable growth

Since the beginning of the 21st century, urban gas in China has maintained rapid growth. From 2004 to 2014, the average annual increase in gas consumption was 24 million people. In 2012, the gas consumption exceeded that of liquefied petroleum gas (LPG), and urban gas became the largest domestic fuel. In 2014, the urban gas consumption population in China was about 310 million, and the gasification rate of urban residents reached 40%, but it is still far below the national level (90% in the United States and 85% in the United Kingdom); The per capita gas consumption is 23 cubic meters, which is only 1/19 and 1/33 of the per capita gas consumption in the United States and the United Kingdom (428 cubic meters in the United States and 752 cubic meters in the United Kingdom), indicating a huge potential for urban gas demand in China.

2. The proportion of gas to electricity is much lower than the world average, and power generation will become the main driving force for China's natural gas growth in the future

In 2015, China's power generation gas consumption was 29.4 billion cubic meters, an increase of 12.2% over the previous year, and the demand for power generation gas increased rapidly. In 2015, China's installed capacity of gas and electricity was 66 million kilowatts, accounting for 4.4% of the total installed capacity; The gas-fired power generation is 165.8 billion kilowatt hours, accounting for 3% of the total power generation in society, far below the world average of about 30%. In the future, under the promotion of multiple factors such as resource supply guarantee, advances in gas turbine technology, and high environmental protection requirements, natural gas power generation will become the main direction of China's natural gas utilization. Natural gas will become an important component of the power fuel structure, and the environmental advantages of gas power and its role in ensuring peak shaving safety in the power grid will be further utilized.

3. Under the rigid constraints of atmospheric environment and total energy consumption, there is enormous room for the development of "gas replacing coal" in industrial fuels

Currently, coal is the main fuel for industrial energy consumption in China, accounting for 72.7% in 2014; In 2015, industrial gas consumption was 57.6 billion cubic meters, a decrease of 5.4% from the previous year, mainly due to the significant drop in prices of competitive energy such as coal, resulting in the phenomenon of "reverse substitution" of natural gas. In 2014, natural gas accounted for about 9.8% of China's industrial fuel energy consumption, far lower than the level of 40% to 50% in the UK and the US. With the implementation of national carbon emission policies and driven by policies such as the National Action Plan for Air Pollution Prevention and Control, the environmental and technological advantages of "replacing coal with gas" are obvious compared to coal-fired industrial boilers/kilns.

4. Natural gas is competitive in the field of public transportation, but policy support needs to be strengthened

Transportation gas is mainly concentrated in the fields of automobiles and ships. In 2014, the total number of automobiles in China was 154 million, with 4 million being natural gas vehicles, accounting for 2.6%; There are 64 LNG ships in stock, still in the demonstration pilot stage. The "gas replacing oil" strategy for vehicles and ships mainly replaces gasoline, diesel, and fuel oil. From the perspective of the entire lifecycle, it has high energy utilization efficiency and obvious environmental advantages. Gas buses and taxis have good economic viability, but face fierce competition from electric vehicles. Vigorously developing natural gas vehicles requires linkage between gas prices and oil prices, environmental protection, and enjoying the same subsidy policies as electric vehicles.

5. The natural gas chemical market will remain stable with a slight decline, which is an important supplement to expanding the utilization of natural gas

In 2015, China's chemical industry used 28.2 billion cubic meters of gas, a decrease of 6.5% from the previous year, accounting for 14.8% of the total natural gas consumption. Affected by the significant decrease in coal prices, the growth of chemical gas consumption has been sluggish in recent years, with some fertilizer and methanol users shutting down or reducing production. The proportion of natural gas consumption has continued to decline, but it is still relatively high compared to the proportion of chemical gas consumption in major countries around the world.