Gas Market Report 2019 |
2. Supply |
Asia Pacific
Natural gas production in the Asia Pacific region is expected to increase by almost 100 bcm/y to 2024, an annual average growth rate of 2.5%. China and Australia are expected to represent around 55% of the region’s total production by 2024 and almost all of the incremental production over the forecast period (Figure 2.9).
Figure 2.9 |
Natural gas production, Asia Pacific, 2004–24 |
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800 |
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90 |
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Change over period |
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bcm |
700 |
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bcm 80 |
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70 |
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600 |
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60 |
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500 |
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50 |
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400 |
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40 |
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30 |
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300 |
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20 |
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200 |
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10 |
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0 |
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100 |
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- 10 |
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- 20 |
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2012-2018 |
2018-2024 |
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2004 |
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2012 |
2016 |
2020 |
2024 |
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China |
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Australia |
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Indonesia |
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Malaysia |
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India |
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Other Asia Pacific |
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IEA, 2019. All rights reserved.
China and Australia drive natural gas production growth in the Asia Pacific region.
China
China’s natural gas production increased from 135 bcm in 2015 to 137 bcm in 2016, 147 bcm in 2017 and 160 bcm in 2018. Since 2016, production has been driven by the 13th Five-Year Plan (FYP) objective of reaching 170 bcm/y of conventional gas, 30 bcm/y of shale gas and 16 bcm/y of coalbed methane (CBM) by 2020. However, in 2018, China’s national oil companies (NOCs) made additional efforts to increase their production in order to reduce the country’s dependency on imports. This followed President Xi Jinping urging them in August 2018 to improve national security by boosting domestic production and reserves, in the aftermath of the supply shortages experienced during the winter of 2017/18.
These efforts have led to a rebound in investment in natural gas production and supply, which grew by 5% and 6% in 2017 and 2018 respectively. Data show that during January and February 2019 investment increased by almost 30% compared to the same period of 2018, reaching CNY 14 billion (Chinese yuan renminbi, or USD 2.1 billion) (Figure 2.10).4
In February 2017 the National Energy Administration (NEA) published the 2017 Energy Work Guidance, which set a target for annual natural gas production of around 170 bcm, including 10 bcm of shale gas (CEC, 2017), while effective production reached 147 bcm in 2017.
4 Using the average 2018 rate of USD 1 = CNY 6.64.
PAGE | 79
IEA. All rights reserved.
Gas Market Report 2019 |
2. Supply |
In 2018 China National Petroleum Corporation (CNPC) accounted for almost 68% of total production, or 109.4 bcm, representing a 5.9% increase y-o-y, including 4.27 bcm of shale gas with 41.2% y-o-y growth. South Sichuan became the largest shale gas production base in China, with an output of over 7 bcm/y (CNPC, 2019).
Sinopec produced 27.6 bcm in 2018, or a 7.08% y-o-y increase (Sinopec, 2019). The company’s major breakthrough has been in the first large-scale shale gas field in China, the Fuling shale gas field, where the number of productive wells increased by 38% in 2018 reaching an annual output of 10 bcm.
Figure 2.10 New investment in natural gas production, China, 2004–18
CNY |
300 |
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270 |
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Billion |
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240 |
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210 |
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180 |
150
120
90
60
30
0
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
Source: NBS (2019), National Data, http://data.stats.gov.cn/easyquery.htm?cn=A01.
In 2018 investment in production reached CNY 238.5 billion (USD 35.9 billion), its historical maximum.
Figure 2.11 Natural gas production, China, 2013–18
bcm |
180 |
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18% |
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160 |
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16% |
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140 |
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14% |
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120 |
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12% |
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100 |
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10% |
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80 |
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8% |
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60 |
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6% |
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40 |
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4% |
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20 |
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2% |
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0% |
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2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 Q1 |
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Natural gas production |
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Y-o-y growth |
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Source: NBS (2019), National Data, http://data.stats.gov.cn/easyquery.htm?cn=A01.
In 2018 China’s natural gas production increased by 8.3%, its highest growth rate since 2013.
PAGE | 80
IEA. All rights reserved.
Gas Market Report 2019 |
2. Supply |
As for China National Offshore Oil Corporation (CNOOC), the company produced 8.5 bcm in 2018, or a 15% y-o-y increase. The biggest growth came from the Eastern South China Sea, where the company produced 3.6 bcm, a 45% y-o-y increase, and in the Bohai Bay, with 1.7 bcm and a 10% increase. In its two other regions, the Western South China Sea (2.7 bcm) and the East China Sea (0.6 bcm), CNOOC‘s production decreased by 3% and 11% respectively (CNOOC, 2019a).
The three provinces of Shaanxi, Sichuan and Xinjiang were responsible for 73% of total natural gas production in 2018 (Table 2.2).
Table 2.2. Major basins and natural gas production by locality, China, 2018
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Production in bcm |
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Shaanxi Province |
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44 |
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Sichuan Province |
41 |
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Xinjiang Region |
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33 |
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Guangdong Province |
10 |
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Qinghai Province |
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6 |
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Chongqing City |
6 |
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Shanxi Province |
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5 |
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Heilongjiang Province |
4 |
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Tianjin City |
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3 |
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Guilin Province |
2 |
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Beijing City |
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2 |
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Others |
4 |
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TOTAL |
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160 |
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Source: NBS (2019), National Data, http://data.stats.gov.cn/easyquery.htm?cn=A01.
For 2019 this forecast expects production to total 171 bcm, representing 6.9% y-o-y growth. CNPC is planning a fivefold increase in capital expenditure from CNY 1 billion to CNY 5 billion (USD 0.15 billion to USD 0.75 billion) between 2018 and 2019. CNOOC plans to invest CNY 12 billion (USD 1.8 billion) in exploration and drilling domestically, doubling its investment from 2017 levels. Sinopec plans to invest CNY 59.6 billion (USD 8.98 billion) in exploration and production. For gas, the company will focus on the Fuling and Weirong shale gas fields, as well as the construction of gas pipelines and storage.
China is expected to produce 242 bcm/y of natural gas by 2024, with an average annual growth rate of 7.1% throughout the forecast period (Figure 2.12).
This report forecasts annual average growth of 6% for conventional natural gas production, from an estimated 136 bcm in 2018 to over 192 bcm in 2024, or an increment of 56 bcm. Unconventional gas is expected to add 26 bcm of annual production during the forecast period, to reach a volume of almost 50 bcm by 2024, with average annual growth of 13%.
PAGE | 81
IEA. All rights reserved.
Gas Market Report 2019 |
2. Supply |
Figure 2.12 Natural gas supply, China, 2012–24
bcm |
500 |
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bcm |
100 |
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450 |
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90 |
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400 |
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80 |
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350 |
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70 |
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300 |
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60 |
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250 |
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50 |
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200 |
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40 |
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150 |
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30 |
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100 |
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20 |
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50 |
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10 |
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0 |
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0 |
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2012 |
2014 |
2016 |
2018 |
2020 |
2022 |
2024 |
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Domestic production
Change over period
2012-18 |
2018-24 |
Imports
IEA, 2019. All rights reserved.
Domestic production is expected to grow more strongly during the forecast period thanks to investment by Chinese NOCs in exploration, production and infrastructure.
Unconventional gas
Shale production continued to rise in 2018, with a 14% y-o-y increase to reach 10.3 bcm. Both CNPC and Sinopec have announced their production targets to 2020, which when combined amount to 19 bcm/y or almost double the 2018 level. This, however, remains below the 30 bcm/y target set in the 2016–20 shale gas development plan (Figure 2.13). This report forecasts the 30 bcm/y goal to be reached between 2023 and 2024. In order to incentivise investment in exploration and production, central government has approved a cut in the resources tax on shale gas from 6% to 4.2% from 1 April 2018 to 31 March 2021 (Argus, 2019a).
Figure 2.13 Shale gas production, China, 2017–20
bcm |
30 |
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25 |
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20 |
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15 |
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10 |
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5 |
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0 |
2017 |
2018 |
2019 |
2020 |
2020 Government |
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Sinopec |
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CNPC |
goal |
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Source: Data sources from CNPC (2019), 2019 Working Meeting, http://news.cnpc.com.cn/system/2019/01/19/001717652.shtml; and Sinopec (2019), Annual Report 2018, www.sinopec.com/listco/en/Resource/Pdf/201903240301.pdf; data for Sinopec for 2019 are estimated.
By 2020 Sinopec and CNPC forecast shale gas production of 19 bcm/y, almost double the 2018 level yet below the 30 bcm/y target set by the 13th FYP.
PAGE | 82
IEA. All rights reserved.