The Future Of China’s Gas Demand

The Future Of China’s Gas Demand

After a pandemic slowdown last year, China's demand for gas appears to have returned stronger than before. In H1 2021, China's gas demand saw a 16% year-on-year increase, led by strong power and industrial demand. Underperforming hydropower in southwest China, tight coal supply coupled with high coal prices across the country, and high summer temperatures supported gas-fired power generation. Export-led economic growth and domestic consumption recovery benefited overall energy demand, including natural gas. So far, China's gas demand has exceeded expectations and we now expect gas demand to increase by 13%, or 42 billion cubic metres (bcm), year-on-year in 2021. But how far can it go and how could carbon neutrality impact the role of gas in China? There are many reasons to believe gas demand still has vast room to expand above current levels. Natural gas fits into China's strategies to diversify the coal-dominated energy mix, improve air quality, and pursue low-carbon development. To meet its rising demand, China has been boosting domestic production, debottlenecking infrastructure, diversifying import sources and introducing market-oriented reforms. In our base case, we expect demand to grow at 5. 5% a year on average between 2020 and 2030. Post-2030, growth will decelerate but by