China's Gas Production Falls Behind Demand

China’s natural gas production is rising at the fastest pace in four years, but that will not be sufficient to meet the demand for the fuel unleashed through a government program to raise gas usage for cleaning the country’s polluted air.

Gas output in China rose to a record 147.4 billion cubic meters last year, up 8.5% from 2016, data from the National Bureau of Statistics showed.  Production is forecast to climb by 6% to 8% per year through 2020, according to researchers at China National Petroleum Corp, Reuters reported.

But China’s war against smog has spawned voracious demand for the fuel that will keep it reliant on growing imports of liquefied natural gas or piped gas. The consumption surge is a result of a government drive that started last year to switch factories and millions of homes from coal to gas in order to cut harmful emissions.

“The momentum of this round of gas boom that started in late 2016 will extend well through this year,” said Li Yao, chief executive at SIA Energy.

China, the world’s largest energy consumer, was the world’s sixth-largest gas producer in 2016 after raising investments over the past 20 years. However, consumption is surging even faster, climbing 15% in 2017 to 237 bcm, according to the National Development and Reform Commission.

SIA expects China’s 2018 gas output to rise by around 8%, or roughly 12 bcm, at the same time that gas demand will rise by 30 bcm, or 12.5%, to 270 bcm. That means China in 2018 will need to import as much as 114 bcm of gas through pipelines and LNG combined. China’s gas imports last year surged by 28%.

The trend of rising imports will continue, with SIA forecasting imports of 132 bcm will be required to meet 317 bcm of demand by 2020.