China’s Gas Development Strategies PDF
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Advances in Oil and Gas Exploration & Production Shell and DRC Editors China’s Gas Development Strategies Advances in Oil and Gas Exploration & Production Series editor Rudy Swennen, Department of Earth and Environmental Sciences, K.U. Leuven, Heverlee, Belgium ThebookseriesAdvancesinOilandGasExploration&Productionpublishes scientificmonographsonabroadrangeoftopicsconcerninggeophysicaland geologicalresearchonconventionalandunconventionaloilandgassystems, and approaching those topics from both an exploration and a production standpoint.Theseriesisintendedtoformadiverselibraryofreferenceworks bydescribingthecurrentstateofresearchonselectedthemes,suchascertain techniquesusedinthepetroleumgeosciencebusinessorregionalaspects.All booksintheseriesarewrittenandeditedbyleadingexpertsactivelyengaged inthe respective field. The Advances in Oil and Gas Exploration & Production series includes both single andmulti-authored books, aswell aseditedvolumes.TheSeries Editor, Dr. Rudy Swennen (KU Leuven, Belgium), is currently accepting proposals and a proposal form can be obtained from our representative at Springer, Dr. Alexis Vizcaino ([email protected]). More information about this series at http://www.springer.com/series/15228 Shell International and The Development Research Center (DRC) of the State ’ Council of the People s Republic of China Editors ’ China s Gas Development Strategies Editors Shell International The Development ResearchCenter Shell Centre (DRC) ofthe State Council of the London People’s Republicof China UK Beijing China ISSN 2509-372X ISSN 2509-3738 (electronic) Advances in Oil andGasExploration & Production ISBN978-3-319-59733-1 ISBN978-3-319-59734-8 (eBook) DOI 10.1007/978-3-319-59734-8 LibraryofCongressControlNumber:2017941486 ©TheEditor(s)(ifapplicable)andTheAuthor(s)2017.Thisbookisanopenaccesspublication OpenAccessThisbookislicensedunderthetermsoftheCreativeCommonsAttribution4.0 InternationalLicense(http://creativecommons.org/licenses/by/4.0/),whichpermitsuse,sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commonslicenseandindicateifchangesweremade. 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Thepublisher,theauthorsandtheeditorsaresafetoassumethattheadviceandinformationin thisbookarebelievedtobetrueandaccurateatthedateofpublication.Neitherthepublishernor the authors or the editors give a warranty, express or implied, with respect to the material containedhereinorforanyerrorsoromissionsthatmayhavebeenmade.Thepublisherremains neutralwithregardtojurisdictionalclaimsinpublishedmapsandinstitutionalaffiliations. Printedonacid-freepaper ThisSpringerimprintispublishedbySpringerNature TheregisteredcompanyisSpringerInternationalPublishingAG Theregisteredcompanyaddressis:Gewerbestrasse11,6330Cham,Switzerland Foreword I How to Encourage the Development of Natural Gas as a Major Energy Source in China Widespread development of natural gas is a textbook approach adopted by developed countries and in emerging economies during optimisation and updating of energy systems. It is also widely recognised as being a key transitional route in the move towards future sustainable energy source systems.FromtheperspectiveofChina,whetherornottofollowthisgeneral patternandthechallenges,opportunitiesandpoliciesrequiredtoachievethe development of natural gas are issues of major concern to policy makers, academics and the business world in general. In order to respond to these questions, following from the previous instalment of the China Mid- to Long-term Energy Development Strategic Joint Study, the State Council DevelopmentResearchCenterandShellorganisedanumberofinternational and local institutions to join forces in conducting further strategic research into the development of natural gas in China. This has received extensive supportfromboththeChineseandBritishgovernments,andonDecember2, 2013,PremierLiKeqiangandPrimeMinisterDavidCameronwitnessedthe signingofbilateralcooperationdocumentsinrespectofthis.Afterayearand ahalfofresearch,theresultsofthisresearchhavebeencollated,andformthe basis for the following primary viewpoints and judgements. Global Natural Gas Development Trends Against the Backdrop of the Shale Natural Gas Revolution 1. Thereareplentifulglobalnaturalgasresources,andthesewillgoon to take a more significant role in future energy systems. There are sufficientglobalnaturalgasresourcestoallowforanadditional200years of extraction, conventional natural gas and unconventional natural gas, each accounting for about a half. There are 50 years of viable confirmed reserves, while the rate at which further reserves are confirmed is greater thantheconsumption.Inthelast10years,therehasbeen2.7%growthin naturalgasconsumption,makingitthefastestgrowingfossilenergytype. In 2014, natural gas accounted for 23.8% of global energy consumption, v vi ForewordI and it is predicted that by 2035 natural gas will have become the largest global energy source. 2. Natural gas trade and pricing approaches will undergo major changes, and there will be an increase in terms of the interconnect- ednessoftheglobalnaturalgasmarket.Theincreaseinimportanceof LNG in addition to the rapid increase in the number of LNG exporting and importing nations will increase the fluidity of the global natural gas market. Natural gas pricing mechanisms will automatically adjust. Cur- rently, theprice of43%of globalwholesale natural gasisestablishedby marketcompetitionandisnotpeggedagainstoilprices.Asbothtradeand pricingmodelschange,therewillbeanincreaseintheinterconnectedness of the three main regional markets of the Americas, Europe and Asia, with the difference in prices shrinking, and developing towards integration. 3. Intheshortterm,therewillbealargedropinnaturalgasprices,but inthelongtermthepriceofimportednaturalgasinChinawillnotbe excessively low. There has recently been a relaxation in terms of natural gas supplies, with a large drop in natural gas prices, as the price of JapaneseLNGhasdroppedfrom$20/MMBtuin2014tothecurrentprice ofaround$7.Butinthelongterm,thepriceofnaturalgaswhenitarrives at Chinese coastal regions from Australia, the United States and Canada, the main newly developed sources of LNG, will not remain below the $10/MMBtulevelforlongduetodevelopment,liquefactionandtransport costs being fairly high. 4. China’s share of the global natural gas market is gradually rising, making it necessary to become more actively involved in the inter- national natural gas market. In 2014, the share of global natural gas consumption accounted for by China was less than 5%, but by 2030 this will have grown to between 9% and 12%. There are abundant global naturalgasresourcesinChina,andChinaalsohasfairlylargenaturalgas resources.IncreasesinnaturalgasconsumptioninChinawillnotresultin a pronounced increase in the global market price. Apart from this, China should not always be on the receiving end of fluctuations in the inter- nationalnaturalgasprice,anditshouldbepossibleforthenationtotakea more active role in the international natural gas market via trade and investment. Changes in the Mode of Supply of China’s Natural Gas in the Future and Main Sources of Conflict 1. China’seconomicdevelopmentisenteringastageofa“newnormal”, with energy demand entering a stage of medium rate increases. The rate at which China’s economy has been developing has already transi- tionedfromahighrateofgrowthtowardsamedium-highrateofgrowth. There will be major changes in economic structures, with the tertiary industry proportion growing while the secondary industry proportion drops. A peak in steel, cement and other heavy/chemical industries will ForewordI vii occurintheperiodsurroundingthe13thFive-YearPlan.Energydemand will revert from a high growth rate to a medium growth rate, while it is predicted that by 2020 total energy consumption may reach 5 billion tonnes ofstandardcoal. Between 2016and2020, average annual growth will be approximately 3%, while by 2030 it is possible that energy consumption may have reached 5.7 billion tonnes of standard coal. 2. If appropriate policies are put in place, China’s natural gas demand will still continue to grow relatively quickly. Development of the ser- vice industry, expanding urbanisation and atmospheric pollution control will drive continuous growth in natural gas consumption. Quantitative analysis indicates that, under the current policy climate, natural gas consumption will have reached 300 billion cubic metres by 2020, reaching 450 billion cubic metres by 2030, respectively accounting for 8.0% and 11.0% of energy consumption. With enhanced environmental measuresandimpositionofacarbontax,naturalgasconsumptionwould reach 350 billion cubic metres by 2020 and 580 billion cubic metres by 2030, respectively accounting for 10.8% and 15.4% of energy con- sumption. This is a significant increase when compared to the 5.8% proportion in 2014. Residential gas, natural gas heating, transport gas, industrialgasandpowergenerationgaswillbefieldsinwhicharelatively rapid rate of growth of natural gas use occurs. 3. There is significant potential in terms of natural gas supplies within China, natural gas import capacity will increase by a large amount. China actually has fairly plentiful natural gas resources. Based on Min- istry of Land and Resources data, there are 40 trillion cubic metres of accessiblenaturalgasreserves(dynamicappraisalofnationaloilandgas reservesin2013),whilethereare25trillioncubicmetresofshalenatural gasand10trillion cubicmetresofcoalbedmethane.Annualdetectionof new reserves is increasing rapidly, reaching 1.1 trillion cubic metres in 2014. However, extraction is both difficult and costly, requiring both technical and institutional innovation, before potential resources can be converted to actual output. Under the current institutional arrangements, thenaturalgasoutputfor2020and2030willbe230billioncubicmetres and 380 billion cubic metres respectively, while shale natural gas will account for 40 billion cubic metres and 80 billion cubic metres respec- tively. If institutional systems were reformed, the 2020 and 2030 natural gas output quantities would be 270 billion cubic metres and 470 billion cubic metres respectively, shale natural gas accounting for 60 billion cubic metres and 150 billion cubic metres respectively. In terms of importsfromabroad,pipelinegasimportcapacitywillreachbetween135 and 165 billion cubic metres by the end of 2020, with LNG imports reaching approximately 65 billion cubic metres. If one then adds to that thecoalgasificationoutputcapacitycurrentlyplannedforconstruction,in 2020, there will be a supply capability of between 415 billion and 495 billion cubic metres. By2030,between665billionand800billioncubic metres of supply capacity will exist. viii ForewordI 4. Pronounced changes will occur in supply and demand relationships, requiringcorrecthandlingofthechallengesfacedinthedevelopment ofnaturalgas.Fromtheabovesupplyanddemandanalysis, supplyand demandofnaturalgaswillbegintoexhibitawiderbalanceoverthenext 5 to 10 years. Supply quantities will no longer be a major factor restricting the development of natural gas. Low efficiency, high prices, difficulties in transport and inflexible institutional arrangements will gradually become more significant, while the main sources of conflict in thedevelopmentofthenaturalgasindustrywillundergoatransformation. If appropriate adjustments are not immediately made to policy, the momentumnecessarytoachievearapidrateofnaturalgasgrowthwillbe lost and this will have an enduring effect on the development of the natural gas industry. Strategy for the Development of Natural Gas Over the Next 15 Years 1. Great efforts should be made towards developing natural gas, in order to develop natural gas into becoming a major energy source. Natural gas is clean, highly efficient and convenient. Regardless of whetheritistheissuesofcontrollingatmosphericpollutionorincreasing the efficiency of energy systems that concern us, or the need to provide peak regulation that will be necessary with the future development of renewable energy on a huge scale, each of these requires large-scale development of natural gas. Natural gas presents effective investment opportunities, due to its potential for massive growth allied with the fact thatthereisnoexcessoutputcapacity.Ifaccesstomarketswererelaxed, there is the potential for annual investment of as much as CNY 400 billion, which would result in a 0.6% increase in GDP. It is safe to say that expansion of effort in the development of natural gas, in order to develop it into a major energy source, conforms to the general patterns encountered in the evolution and updating of global energy systems and the urgent needs for economic and social development encountered in China. 2. Natural gas should be developed in a safe, highly efficient and sus- tainablemanner.Bysafe, wearereallyreferringtotwolayersofsafety involving natural gas resource assurances and manufacturing and opera- tions, as these are prerequisites for the development of the natural gas industry.Increasinglocalsuppliesinadditiontoexpandingthesourcesof imported gas and increasing modes of import are both essential to this process.Atthesametime,nationalnaturalgasnetworkconnectionsneed to be improved, which should be accompanied by construction of multi-level natural gas storage in order to ensure stable operation. High efficiency relates to increasing efficiency in natural gas exploration, transport and usage, as this will form the foundation of the development of natural gas in China. Sustainability relates to the balancing of eco- logical and environmental needs that the development of natural gas allows,thisbeingamajoraimofdevelopingnaturalgas.Atthesametime asextraction,deliveryandusageoccur,specialattentionneedstobepaid ForewordI ix to environmental protection and the sustainability of resource supplies. Sustainabilityconceptsmustbeappliedtothedesignandplanningofthe overall energy systems. In particular, this can be achieved by ensuring that the external costs of environmental pollution are fully reflected, in order to allow for the full adoption of natural gas. 3. Clarificationofthestrategic aimsandpathwaystobeadoptedinthe development of natural gas. The aim is that by 2020, the share of primary energy consumption accounted for by natural gas should reach 10%, with consumptionincreasing to 350 billion cubic metres. By 2030, the share of primary energy consumption accounted for by natural gas should reach 15%, with consumption reaching 580 billion cubic metres. The main pathways are: guiding and nurturing the natural gas con- sumption market, accelerating the diversification of upstream natural gas supplies,creatingasafe,fairandtransparentnaturalgaspipelinetransport and storage network, relying on technical innovation to improve the technicalstandardsoftheindustry,activelypromotingnaturalgaspricing reforms, and creating a modern natural gas market system and govern- ment regulatory system. GuidingandNurturingtheNaturalGas-consumingMarket,Expanding the Scope of Natural Gas Usage 1. Key to expanding the use of natural gas is improving its economic competitiveness. Central heating, natural gas power generation and industrial fuels have a low natural gas price tolerance and, under the currentpricingsystem,naturalgasisnotcompetitive.Toincreasenatural gas competitiveness would, first, require the internalisation of external costs, the effects on the environment and health of energy use would thereforeneedtobereflected,whichwouldallowgreateradvantagetobe taken of natural gas environmental strengths. Second, natural gas usage efficiencyneedstobeimproved,animprovementinefficiencyhelpingto restrict the increasing costs of energy usage. 2. Increase environmental monitoring and improve energy usage effi- ciency,withthereplacementofdispersedcoalusage.Thereplacement of dispersed coal usage is one of the most important areas in which natural gas should be developed. First, environmental monitoring would be increased, with online coal boiler pollution and emissions reduction detection systems, capable of real-time monitoring of waste gas emis- sions. Second, more effort would be put into energy-saving upgrades, improving energy usage efficiency, with the government providing a certain amount of fiscal support. Third, in China’s eastern and central regions,wheretherearemajor issuesinterms ofcontrolling atmospheric pollution, no additional new coal-fired boilers should be permitted, with gasusebecomingobligatory.Itispredictedthatby2030,thereplacement ofdispersedcoalusagewouldrequire280billioncubicmetresofnatural gas.
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