By 2025, China plans to extend its massive gas pipeline grids to 163,000 kilometres, requiring capital expenditure of up to $1.9 trillion
China is on the verge of a spending spree to expand the country’s natural gas pipeline grids over the next four years to transport greater volumes to more clients and utilities.
Ding Zhimin, the former deputy director of the Policy & Law Department of the National Energy Administration, told a webinar late last week that China will spend 11 trillion to 13 trillion yuan (US$1.6 trillion to US$1.9 trillion) to double the nationwide gas network to 163,000 kilometres by 2025.
Extravagant spending pledges on gas infrastructure reflects China’s strategy to prioritise gas consumption, considered the most effective bridge fuel to bring emissions down before renewable energy can play a more significant role in the economy.
One of the pipelines under study is the second Russian gas import pipeline expected to extend to China via Mongolia from Russia’s prolific gas fields in the Yamal-Nenets region, spanning 6700 kilometres.
The pipeline, dubbed Sila Sibiri 2, is billed as offering capacity to deliver 50 billion cubic metres per annum of gas to the Chinese market.
In February, Gazprom also committed to transport 10 Bcm of gas per year from Russia’s Sakhalin Island for the period of 30 years to China, with the project codenamed Sila Sibiri 3.
This is in addition to the 38 Bcm of pipeline gas exports per year by 2025 through the existing Sila Sibiri pipeline under a contract that was inked in 2014.
Russia is also considering boosting the throughput capacity of the Sila Sibiri pipeline to 44 Bcm from 38 Bcm, according to Liu Qian, executive vice director of the Russia-Central Asia Research Centre-attached China Petroleum University.
Investment and construction will be spearheaded by China Oil & Gas Pipeline Grid (PipeChina), a government-owned entity established in 2020 by grouping the oil and gas pipelines initially owned by China National Petroleum Corporation (CNPC), Sinopec and China National Offshore Oil Corporation.
The entity purports to centralise operation of the nation’s massive oil and gas infrastructures including pipelines, terminals and storage tanks.
The country’s top gas producer CNPC said that natural gas demand will peak at 650 Bcm by 2040, after which it will taper off to 410 Bcm in 2060.
The major drivers for gas demand growth were identified as power generation, industry utilities and construction.
Ding Zhimin said that China’s current gas pipeline network is “seriously inadequate” to meet the expected huge growth in gas demand. Opportunities to invest in and build gas pipelines go to private businesses as well as state-owned enterprises.
“The market potential is huge,” she said.
China’s gas consumption is expected to rise 8.2% year-on-year to 395 Bcm in 2022, with demand from the town gas sector forecast to increase by 12.9% to 124.4 Bcm.
Industry will consume 160 Bcm, up 10.1% on the year, demand from the power generation sector will jump 11.4% to 73 Bcm, with the remainder to be used as feedstock for chemical production.
China’s gas production will increase in line with the demand growth, but at a slower rate than imports.
CNPC said domestic gas production will rise to 250 Bcm in 2030 and further to 350 Bcm in 2060, up from 2021’s 205.3 Bcm.
Of the total 395 Bcm gas consumption this year, almost 222 Bcm will come from domestic production, up 6.2% on the year, while 62 Bcm will be pipeline gas imports — up 6% — while liquefied natural gas imports will amount to 123 Bcm (88.6 million tonnes).
By the end of last year, China operated 84,000 kilometres of gas pipelines, dominated by three parallel west-east gas grids extending from gas deposits in Russia and other northeastern Asian countries as well as northwestern China to the markets in eastern and southern China.