Challenges of China’s Fuel of Choice

The Chinese economy has grown by an average of 10 percent a year over the past two decades, crossing the milestone to become the second-largest economy and energy user in 2010 after the U.S., as well as the world's largest emitter of greenhouse gases. Stable energy supplies being at the core of China’s rise, they remain pivotal to its continued economic growth, especially coal, oil and gas. While coal still constitutes around 68 percent of China’s energy use, Chinese policymakers and energy executives lean more and more towards cleaner fuel sources, particularly natural gas. According to International Energy Agency’s June 2012 report, the share of natural gas is set to rise in China’s energy mix, which is expected to have strong implications on the country’s energy usage in the years to come.

Analyzing the new role of natural gas in China, my new article published in Oilprice looked into China’s natural gas policy, main players in its gas market and problems it faces with the rise of Central Asian gas imports (full article can be accessed here). I concluded that mounting natural gas demand, combined with the official endorsement of clean energy sources, is bound to solidify the position of natural gas in China’s energy mix in the years to come. But liberalization of domestic natural gas prices will be absolutely key to attracting private investment to successfully develop domestic gas and to continue importing this energy source without hurting Chinese energy companies.