China plans to build two large CBM production bases, one in the Qinshui Basin and another in the Ordos Basin, both in Shanxi province. Each has a recoverable reserve of 1 tcm, according to the Shanxi Provincial Development and Reform Commission. By 2020 the country plans to produce 24 bcm/y of gas from its CBM production bases, of which 20 bcm/y will come from Shanxi. The province expects by 2020 to be able to send 6 bcm/y to other parts of the country using pipelines (Xinhua Net, 2018). Coalbed methane production reached 7.62 bcm in 2018, with a 4.2% increase (NBS,2019).

Regarding tight gas, which accounted for 30% of total gas production in 2018, reserves are concentrated in the Sichuan and Ordos basins. According to CNPC’s 2019–2025 Domestic Exploration and Production Plan, the company is looking to reach output of 32 bcm/y by 2020 and 35 bcm/y by 2025 (Youlong, 2019). In December 2018 CNPC and Shell started the second phase of development at the Changbei tight gas block, in northwest China’s Ordos Basin in Shanxi, with expected production of 0.5 bcm in 2019 reaching to over 2 bcm/y by 2024. FID was taken in March 2018. By the end of 2024 CNPC aims to produce 3.64 bcm/y from the two phases of the Changbei block (Argus, 2018). Sinopec is also looking to develop tight gas production at the Daniudi tight gas field in the Ordos Basin.

Developing the network to reduce internal supply bottlenecks

The National Development and Reform Commission (NDRC) issued in February 2018 a notice to accelerate the interconnection of natural gas infrastructure, in order to improve the prevailing lack of connection between the north and the south of the country and to avoid any further supply shortages during the 2018/19 winter. The notice highlighted “10+1 key projects” (divided into 27 smaller projects) that included new pipelines and compressor stations. The goal was to increase supply capacity to Beijing, Tianjin, Hebei and the surrounding areas. The different projects, distributed along the provinces of Guangdong, Hunan, Ningxia, Jiangsu, Jiangsi and Anhui, sought to connect import facilities such as the Guangxi LNG Terminal (Sinopec) with the China–Myanmar pipeline (CNPC) or improve the connection with storage facilities, such as between the Dalian LNG terminal (CNPC) with the Shuang 6 underground gas storage (UGS) plant (CNPC) (Wall Street China, 2018) (CNPC, 2018a).

On their side, state-owned companies have also been working to increase internal capacity:

At the end of 2017 CNOOC started to inject natural gas from its LNG terminals (Zhuhai and Diefu) and its South China Sea production plant in Guangdong into CNPC’s West–East pipeline, supplying natural gas to the north of Guangdong, so that CNPC can allocate these volumes to northern regions. This connection already has a capacity of 30 million cubic metres per day (mcm/d) (or 10.95 bcm/y). CNOOC auctioned imported volumes on the Shanghai Petroleum and Gas Exchange to be transported through CNPC’s pipeline network.

 CNPC committed to invest more than CNY 25.8 billion (USD 3.89 billion) to implement 33 interconnection projects starting in 2018/19, in order to optimise the pipeline system (national and regional) and solve the bottleneck problems. CNPC has been working with CNOOC to connect the Guangdong LNG terminal to the West–East pipeline (CNPC, 2018b; 2018c).

Sinopec successfully connected a feeder line to CNPC’s China–Myanmar gas pipeline in September 2018, allowing the company to inject 55 mcm/d of gas into the pipe, helping boost supplies to the northern regions of China (Sinopec, 2018). Sinopec is looking to connect its Shaanxi–Beijing line to CNPC’s Power of Siberia pipeline. Additionally, in November 2018 the company started operating the first phase of the Erdos–Anping–

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Cangzhou pipeline of 700 kilometres. The pipeline will use the Tianjin LNG terminal as its gas source, alleviating winter supply shortages in Hebei and Henan provinces.

Such investments in the domestic pipeline network are expected to continue and thus help to alleviate network bottlenecks and improve internal transport capacity during the forecast period.

Increasing UGS capacity to develop seasonal flexibility

China is also boosting its UGS capacity in order to increase the supply of seasonal flexibility for winter demand. Sinopec has two UGS facilities, Wen 96 located in Zhongyuan in Henan province, and Jintan in Jiangsu province. Sinopec is due to start operations of the Wen 23 UGS by 2020, becoming the company’s third and largest gas storage site. Located in the Zhongyuan field, the UGS has a design capacity of 10.43 bcm and nameplate working capacity of 4.47 bcm (of which 8.43 bcm and 3.27 bcm respectively are for the first phase). This site will store natural gas from Sinopec’s terminal in Tianjin, and hopes to be able to inject at least 2 bcm in 2019.

Sinopec has plans to add 5.6 bcm of additional storage capacity at the Zhongyuan field in Puyang in Henan province. Additionally, the company announced its plan to develop three new UGS facilities (Huangchang, Zhongyuan Wei 11 and Zhujiadun) and expand its Jintan facility, reaching 14.6 bcm of UGS capacity by 2024. CNPC runs 23 UGS facilities with a total working capacity of 16.4 bcm (and a maximum of 17.5bcm), and is expected to reach 23.5 bcm of total working capacity by 2024 (Figure 2.14).

Figure 2.14 UGS working capacity, China, 2018–25

Source: Created using data sources form Argus: Chinese Underground gas storage projects, https://direct.argusmedia.com/search/search?keywords=china&section=FundamentalsAndDownloads&orderby=date (subscription required).

About 17 bcm of new UGS capacity is expected to be commissioned by 2025, resulting in a doubling of working gas capacity over the next six years.

At a provincial level, governments are also seeking to boost their local storage. Yunnan province is looking to add another 1.5 bcm of gas storage capacity by 2025 to meet increasing demand, from the current 0.0139 bcm – equivalent to just 0.9% of 2018 gas demand in that province, which was 1.545 bcm. Demand is expected to reach 3.2 bcm and 4 bcm in 2020 and 2025 respectively. The local firm Yunnan Natural Gas plans to invest around CNY 2.8 billion

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