China's Natural Gas Imports and Prospects
Abstract
The project provides an overview of China’s current natural gas imports and key factors
impacting its future imports. As part of its strategy to pursue cleaner energy sources,
the Chinese government has pledged to consume more natural gas, which has historically
been underrepresented in the country’s energy mix. To achieve its natural gas consumption
goal, China’s demand for imported natural gas is expected to reach 124 billion cubic
meters in 2020, more than tripling its imports in 2012 of 38 billion cubic meters.
Cheap and abundant gas in the U.S., as a result of the shale gas revolution, has generated
enormous interest in China about the possibility of importing LNG from the U.S. However,
uncertainties surrounding U.S. natural gas export policies reinforced China’s impression
that importing gas from the U.S. may be a difficult and prolonged process. Several
studies predict that the future influx of gas from the U.S. into the international
market will lead to a decline in natural gas prices worldwide. As a result, even if
China does not import LNG from the U.S., it is likely to benefit from the decrease
in LNG prices in the global market.
The mere possibility of importing gas from the U.S. has given China more leverage
in its negotiations with Russia over the China-Russia gas pipeline. Given the recent
progress the two countries have made in their negotiations, it is expected that Russia
and China will finalize the gas pipeline agreement by the end of 2014. By 2020, the
pipeline is expected to deliver 68 billion cubic meters of gas annually from Russia
to China, meeting more than half of China’s total demand for imported gas. A secured
supply of pipeline gas from Russia may depress China’s appetite for LNG imports from
additional sources including the U.S.
In addition, China’s domestic factors – including the gas tariff mechanism and regulations
on import rights and infrastructure – will impact its future LNG imports. The current
state-mandated gas tariff mechanism in China has led to losses of gas importing companies,
since the mandated gas prices are not sufficient to cover the costs of imported gas.
High barriers for any non-state capital to enter the gas-importing sector have further
hindered efficient investments made along the LNG import value chain. Favorable regulatory
reforms will incentivize Chinese companies, in particular non-state enterprises, to
pursue cheaper natural gas supplies overseas, thereby increasing China’s competitiveness
as a gas importer in the international market.
Type
Master's projectDepartment
The Sanford School of Public PolicySubject
China's natural gas importsPermalink
https://hdl.handle.net/10161/8459Citation
Tang, Tingting (2014). China's Natural Gas Imports and Prospects. Master's project, Duke University. Retrieved from https://hdl.handle.net/10161/8459.More Info
Show full item record
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.
Rights for Collection: Sanford School Master of Public Policy (MPP) Program Master’s Projects
Works are deposited here by their authors, and represent their research and opinions, not that of Duke University. Some materials and descriptions may include offensive content. More info