Overview of the development of China's natural gas industry under the background of carbon neutrality

1 The role and prospects of natural gas in the energy system

Since the goal of "carbon neutrality" was proposed, many institutions and scholars have conducted research on the role and prospects of natural gas in China's energy system.

1.1 The role of natural gas in the "carbon neutral" process

China's energy structure is dominated by coal, and coal has long been in the leading position in the primary energy structure. In the context of the rapid growth of energy consumption in China, the use of low-carbon or non-fossil energy to replace high-carbon emissions of coal is one of the important means to reduce carbon dioxide emissions. Hong Tao [1] believes that deep electrification and high permeability green hydrogen will take a long time to achieve, and the use of low-carbon natural gas instead of coal in the medium term will greatly promote the realization of the "dual carbon" goal. Luozuo County [2] pointed out that coal must be reduced to reduce carbon, and the focus of coal reduction is to use gas electricity, renewable energy and nuclear power to replace coal electricity. Because large-scale energy storage technology has not yet been broken through, the lack of stability of renewable energy power generation is more prominent, and nuclear power is difficult to use on a large scale due to safety issues. In contrast, natural gas power generation has the advantages of stable resource supply and mature technology, and the use of natural gas to replace coal is a realistic choice for China to achieve "carbon peak" before 2030. Zhang Rongwang [3] pointed out that non-fossil energy cannot fully meet China's huge energy volume in the short term due to factors such as peak load capacity and application scope. Although natural gas is a fossil energy, in the case of equal calorific value, carbon emissions are reduced by about 45% than coal, which is a realistic choice to ensure energy security and energy structure transformation in the near future, and will play a bridge and support role in energy transformation. Duan Yanzhi et al. [4] pointed out that the proposal of the goal of "carbon neutrality" will accelerate the development of green energy such as wind energy, while the efficient and flexible characteristics of natural gas can be used to make up for the disadvantages of other green energy, so the large-scale use of wind energy will promote the growth of natural gas consumption in the long run. According to the research of Zhou Shuhui et al. [5], the role of natural gas in the path of "carbon neutrality" can be divided into four stages: from 2020 to 2030, natural gas will exert its low-carbon characteristics to help "carbon peak"; From 2030 to 2035, natural gas will enter a stage of integration with renewable energy; Full integration of natural gas and renewable energy in 2035-2050; From 2050 to 2060, natural gas will continue to play a supporting role for renewable energy.

1.2 Forecast of natural gas supply and demand

1.2.1 Forecast of natural gas consumption

According to the research of Zhou Shuhui et al. [5], in the carbon neutral scenario, China's natural gas consumption will peak at about 6 500×108 m3 in 2035, then have a plateau period of 5 to 10 years, drop to 5 500×108 m3 in 2050, and still remain at 4 300×108 m3 in 2060. Li, Children and Children [6] projected China's natural gas consumption in three scenarios. Although the results were slightly different, the peak time of natural gas consumption in the three scenarios was close to the peak: the peak time was about 5 000×108 m3, and the peak time was around 2035. Gao Zhenyu et al. [7], starting from the terminal consumption of natural gas and forecasting the consumption of natural gas by industry, predicted that the total consumption of natural gas in China would reach 6 000×108 m3 in 2035. Zhang Rongwang [3] believes that China's natural gas market will continue to grow during the 14th Five-Year Plan period. It is estimated that the total consumption of natural gas in 2025 will be about 4 500×108 m3, and the total consumption of natural gas in 2030 will be about 6 020×108 m3, and the peak consumption will come around 2045. Hong Tao [1] believes that China's natural gas consumption will peak around 2040, with a peak value of about 6 000×108 m3, accounting for less than 15% of the primary energy. According to the International Energy Agency's World Energy Outlook 2020 [8], under the scenario of sustainable development, China's natural gas consumption in 2025, 2030 and 2040 will be 3 980×108 m3, 4 460×108 m3 and 5 110×108 m3 respectively. According to the report "Research on China's Low-carbon Development and Transformation Path" released by Tsinghua University in October 2020 [9], under the 1.5 ℃ scenario, natural gas consumption will peak at 5,800 ×108 m3 around 2030 and drop to 3,380 ×108 m3 in 2040. In 2050, it will drop to 1 500×108 m3. In the "Road to Zero Carbon: The 14th Five-Year Plan Opens a New Chapter in China's Green Development" [10] enhanced action scenario released by the World Resources Institute in December 2020, China's natural gas consumption in 2050 will be about 4,600 ×108 m3, a slight increase over the consumption scale in 2030. In the net-zero emission scenario of BP's World Energy Outlook (2020 Edition) [11], peak gas demand is 5,020 ×108 m3 in 2030 and 4,670 ×108 m3 in 2050. According to China Energy and Power Development Outlook [12] released by State Grid Energy Research Institute Co., LTD., under the scenario of accelerated electrification, the demand for natural gas will peak around 2040 at a peak level of about 6 000×108 m3 and drop to 4 400×108 m3 in 2050. In 2060, it will be reduced to 4 100×108 m3. According to the Research Report on China's Carbon Neutrality before 2060 released by the Global Energy Internet Development Cooperation Organization [13], in the context of carbon neutrality, China's natural gas consumption will peak in 2035, with a peak consumption of about 5,000 ×108 m3.

1.2.2 Analysis of natural gas supply situation

During the 13th Five-Year Plan period, both domestic and imported natural gas played an important role in the stable supply of natural gas in China. In terms of production, China's natural gas exploration and development has made significant progress, with natural gas production maintaining an average annual growth of more than 100×108 m3 and reaching 1 925×108 m3 (coal-to-gas) in 2020. Among them, shale gas production exceeds 200×108 m3, and the proportion of production rises from 3.5% in 2015 to 10.4% in 2020, accounting for an increase year by year. In terms of imported gas, China's natural gas imports in 2020 are about 1 408×108 m3, accounting for 43% of China's natural gas consumption. Pipeline gas imports mainly come from Turkmenistan, Uzbekistan, Kazakhstan, Myanmar, Russia, about 476×108 m3; LNG imports mainly come from Australia, Qatar and other countries, about 932×108 m3.

In the case of China's high dependence on foreign natural gas, how to effectively meet the growth of China's natural gas demand in the coming period of time is a research focus of many scholars. Lu Jialiang et al. [14] built an integrated natural gas production forecasting system by using grey - Hubbert, neural network - Hubbert and production composition methods to forecast China's natural gas production. It is estimated that China's natural gas production in 2025 will range from 2 100×108 to 2 450×108 m3. Production in 2050 is between 3 300×108 and 4 100×108 m3, of which shale gas production is expected to exceed 1 000×108 m3 in 2050. Wang Jianliang et al. [15] selected the multi-cycle generalized Weng model to forecast China's natural gas production by scenario, and believed that under the premise of continuously increasing investment in exploration and technology research and development, China's natural gas production in 2025 is expected to exceed 2 100×108 m3, with peak production ranging from 3 982×108 to 4 663×108 m3. The peak will occur between 2055 and 2060, with shale gas production having the greatest potential for growth. From the perspective of technology and resource potential, Zou Caineng et al. [16] comprehensively analyzed that under the current technical conditions, China's shale gas production is expected to reach 300×108 m3 in 2025, which is a new force for the growth of natural gas production. Dai Jinxing et al. [17] systematically summarized the amount and proved degree of natural gas resources in China, the growth characteristics of annual natural gas production and the growth law of remaining recoverable natural gas reserves, and made corresponding comparisons with the world's major gas producing countries, and concluded that China's annual gas production could reach 2 500×108 m3 in 2025. Jia Ailin et al. [18], on the basis of evaluating the production potential of conventional and unconventional natural gas exploration and storage expansion and development, believe that China's natural gas production is expected to reach 2 270×108 m3 in 2025. According to BP's World Energy Outlook (2020 Edition) [11], China's natural gas production will grow rapidly during the 14th Five-Year Plan period, and it is expected that the output will be 2 410×108 m3 in 2025, and the output will peak around 2045, with the peak output higher than 3 000×108 m3.

At present, China has signed long-term natural gas import contracts (including pipeline gas and LNG) of about 1 600×108 m3[19]. Among them, the LNG contract execution volume is about 800×108 m3, and the pipeline gas is about 800×108 m3[3]. In terms of pipeline gas, the growth potential of natural gas imports from Turkmenistan, Uzbekistan, Kazakhstan and Myanmar is limited, and the increase in imports is mainly from Russia. With the completion and operation of the China-Russia East Route natural gas pipeline during the "14th Five-Year Plan" period, its import volume is expected to reach the designed gas transmission capacity of 380×108 m3/a in 2025, and the increase is expected to be about 300×108 m3. Zhou Shuhui et al. [5] believe that if the demand of 4,300 ×108 ~ 4,500 ×108 m3 is estimated, China's natural gas supply gap will be about 400×108 m3 by 2025, which will need to be supplemented by LNG spot or new contract resources. The "2020 Domestic and Foreign Oil and Gas Industry Development Report" [20] released by the China Petroleum Economics and Technology Research Institute pointed out that the rapid growth of LNG receiving capacity will drive a substantial increase in LNG imports, and the domestic natural gas supply will be relatively loose during the "14th Five-Year Plan" period.

Ma Li et al. [21] and Shan Weiguo et al. [22] pointed out that as fewer natural gas liquefaction projects passed the Final Investment Decision (FID) from 2015 to 2018, the spot price of LNG in Asia will fluctuate upward and rise to a high point before 2024. It turns downward in 2025. According to the research of Bai Hua et al. [23], during the "14th Five-Year Plan" period, the global natural gas market will gradually tighten, there will be a short supply in 2023-2025, and the price will bottom out and rise in 2021, but the average price during the "14th Five-Year Plan" period will be slightly lower than the "13th Five-Year Plan". The "Domestic and Foreign Oil and Gas Industry Development Report 2020" [20] pointed out that in the "14th Five-Year Plan" period, the average spot price of LNG in Northeast Asia was 6.4 US dollars /mmBtu (1 mmBtu=1 055 MJ), which was basically the same as that in the "13th Five-Year Plan" period.

In the longer term, it will be easier to meet domestic gas demand in a "carbon neutral" context. Domestic natural gas production is expected to peak later than 2050, while consumption may peak around 2035. After consumption peaks, China's need for imported natural gas will gradually diminish. From the perspective of the international market, according to the business-as-usual scenario of BP's World Energy Outlook (2020 Edition), global natural gas production has the resource potential to exceed 5×1012 m3 in 2040, while with the acceleration of the global low-carbon transition, the global natural gas demand is expected to be difficult to exceed 4.7×1012 m3[11].

The above research shows that compared with other low carbon or no carbon energy, China's natural gas large-scale stable supply of the most solid foundation, is not only to replace coal, to achieve "low carbon" the most realistic choice, but also renewable energy "life partner", will play a key role in the realization of "carbon neutral" goal. From the perspective of the path, the main role of natural gas before 2030 is to reduce carbon and help China reach its peak as soon as possible, and then with the rapid increase in the proportion of renewable energy, natural gas will gradually integrate with renewable energy and become a beneficial supplement to renewable energy. From a quantitative point of view, under the goal of "carbon neutrality", China's natural gas consumption has a high probability of maintaining rapid growth in the next 10 years, and its peak is expected to appear around 2035, with a high probability of peak consumption ranging from 5 500×108 to 6 000×108 m3.

2. Natural gas industry upgrading and development path

During the 13th Five-Year Plan period, China's energy supply side reform continued to advance, the development of natural gas industry accelerated, its status in the primary energy consumption structure continued to rise, and gradually formed a production, supply, storage and marketing system with Chinese characteristics. In the context of "carbon neutrality", the construction of China's production, supply, storage and marketing system will continue to advance to ensure the safe, efficient and sustainable supply of domestic natural gas.

We will accelerate the construction of natural gas infrastructure

During the "13th Five-Year Plan" period, China's natural gas long-distance pipeline increased by 1.9×104 km to 8.3×104 km, and has initially formed "four (import) channels" and "three vertical and three horizontal" pipe network system; LNG receiving capacity doubled to nearly 9 000×104 t; The working volume of underground gas storage increased by 92×108 m3 to 147×108 m3, but it only accounted for 4.5% of China's natural gas consumption, which was far lower than the world average level. Although China's infrastructure construction during the 13th Five-Year Plan period has achieved remarkable results, there are still many areas that need to be strengthened. The "China Natural Gas High-quality Development Report (2020)" issued by the Institute of Resources and Environmental Policy of the Development Research Center of The State Council pointed out that China's natural gas pipeline construction is relatively lagging behind, the efficiency of emergency reserve capacity construction is relatively low, and the capacity of gas storage and peak regulation needs to be strengthened. Sun Zhe [24] believes that the legal norms, incentive measures, supervision mechanism and main responsibilities of natural gas peaking reserve in China are not yet complete. Zhou Mingliang [25] pointed out that the construction of natural gas strategic reserves is imminent, and it is necessary to speed up the formulation of laws and regulations on natural gas strategic reserves, solve the problem of profitability of gas storage facilities, encourage the entry of diversified capital, and solve the problem of natural gas entry and exit of gas storage facilities.

It is expected that during the "14th Five-Year Plan" period, the construction of China's natural gas infrastructure will be promoted in an orderly manner. According to the Medium and Long Term Oil and Gas Pipeline Network Plan, during the 14th Five-Year Plan period, China will promote the construction of China-Russia natural gas pipelines such as the Eastern Route, the fourth West-East gas pipeline, the fifth West-east gas pipeline, and the second line of Sichuan-East gas transmission, and strengthen infrastructure connectivity, focusing on the Beijing-Tianjin-Hebei region and its surrounding areas, the Yangtze River Delta, the Pearl River Delta, Northeast China, and Hainan. We will promote the development of regional and branch pipe networks. In addition, if the Sino-Russian Far East gas pipeline and Sino-Russian Middle Route gas pipeline negotiations go smoothly, construction is expected to start during the "14th Five-Year Plan" period [26]. It is expected that at the end of the "14th Five-Year Plan", China's natural gas pipelines will form a "four (import) channels" and "five vertical and five horizontal" trunk pipe network pattern [27]. According to the review of new construction, expansion and planning projects, it is expected that the designed receiving capacity of domestic LNG receiving stations will reach 1.9×108 t/a in 2025 [20].