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Tim Daiss

China has reached an enviable place in energy markets. It is awash in natural gas supply and has enough suppliers to be able to dictate its own negotiating terms. China uses gas mostly for its power sector and as a way to help pivot away from coal to rein in carbon dioxide emissions.
That gas supply is now even larger. Over the past few weeks, there have been three developments to underscore Beijing’s natural gas ambitions. One is the start of commercial operations of Guangdong Energy Group’s new US$1 billion liquefied natural gas (LNG) receiving terminal in Huizhou, Guangdong province.
Meanwhile, French-based multinational Total Energies announced a five-year extension of its sales and purchase agreement with the state-run China National Offshore Oil Corporation for the delivery of 1.25 million tonnes of LNG per year until 2034.
And, last month, Chinese media announced that the second phase of the country’s first independently developed ultra-deep-water gas field, Shenhai Yihao, or Deep Sea No 1, had become operational in waters southeast of Hainan, China’s southernmost province.
China’s ample gas supply is no mean feat and did not happen overnight. It took years of concerted effort, planning and investment. The country is the world’s largest importer of LNG, lining up supply deals with top producers such as Australia, Qatar, Malaysia and others.
In lockstep, China has also become the world’s second-largest LNG reseller, cutting deals with countries where prices are higher than usual to plug supply gaps in their inventory levels. Chinese energy companies have also taken advantage of low LNG spot prices this year to boost supplies that would otherwise have been bought by other countries.

China also imports gas using long-distance pipelines from three main locations: Turkmenistan, Russia and Myanmar. Russian gas exports to China via the Power of Siberia pipeline are expected to reach its initial capacity of 38 billion cubic metres (1.3 trillion cubic feet) per year as soon as 2025.
In 2023, China’s natural gas imports averaged 16 billion cubic feet per day and accounted for 42 per cent of the nation’s total natural gas supply, compared with 15 per cent of its supply in 2010. The balance of its supply is from both onshore and offshore gas production, including in the hydrocarbon rich South China Sea.
Chinese negotiators now push for much lower buying prices and more advantageous contractual terms or simply walk away from the bargaining table, leaving suppliers frustrated. Russia experienced this first hand this summer, regarding the Power of Siberia 2 pipeline, which is still under construction. If finished, the pipeline is expected to bring gas from Siberia to China.
China not only pressed for prices so low that Russia couldn’t agree to them, it also made it clear it would only be able to buy a small fraction of the pipeline’s planned 50 billion cubic metres annual capacity. Russian analysts have complained, often bitterly, that Moscow now finds itself at the mercy of a single buyer, but there is very little it can actually do. It is not clear when or if the two sides will come back to the negotiating table but, even if they do, China is likely to drive as hard a bargain as before.

Going forward, however, China has a decision to make. Will it keep cutting more gas deals and building out more gas infrastructure or will it pull back in favour of more renewable energy and coal development? A clue to answering that question comes from looking at how quickly Beijing is increasing its renewables sector.
China leads the world with 339 gigawatts of solar and wind power under construction, nearly double the rest of the world. Solar and wind now account for 37 per cent of the country’s total power capacity, and that is set to surpass coal this year. In 2023, China added nearly twice the solar and wind power capacity as any previous year.
On the other side of the equation, China’s 14th Five-Year Plan (2021–25) set a domestic natural gas production target of 22.3 billion cubic feet per day by 2025, with most of that being met already.
A S&P Global report from September 24 helps answer our question. It found that China’s gas sector is falling into what it refers to as an awkward middle ground. “It’s more expensive than coal, and it’s not as green as renewables,” it said. The report sees gas volume growth in the country as moderating over the coming five to six years as the government starts to slowly deprioritise its use amid the rise of renewables and upgrades to coal power.
However, therein lies the problem. Though gas still emits around half the carbon dioxide that coal does when used in power generation, it is still a much cleaner-burning fuel, without the sulphur dioxide and particulates that contribute to smog, acid rain, haze, respiratory illness and lung disease.
Pulling back on gas in favour of coal would be a cataclysmic mistake that could jeopardise all the hard work so far in building out one of the world’s leading gas sectors, as well as the largest solar and wind power sectors.
A better way forward would be to avoid incentivising new coal-fired power projects and instead prioritise natural-gas projects as a transition fuel and a cleaner burning power-sector fuel in its own right. After all, the economies of scale are already in place giving Beijing energy planners a head start.


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Beijing shouldn’t squander its gas market advantage that can help wean the nation off coal on the way to net zero


Beijing shouldn’t squander its gas market advantage that can help wean the nation off coal on the way to net zero.


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Expresses the views, ideas and conclusions of the author. (Eg. Enough of Crazy Rich Asians, think of crazy poor Hongkongers.)


China has built up an enviable gas supply. Now it faces a dilemma

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Beijing shouldn’t squander its gas market advantage that can help wean the nation off coal on the way to net zero

Beijing shouldn’t squander its gas market advantage that can help wean the nation off coal on the way to net zero