China expects to set new records for coal and natural gas production this year, but will be cutting the share of coal consumption in the total primary energy mix while raising the natural gas share, the Chinese National Energy Administration (NEA) said on Wednesday.
In 2018, China’s natural gas production is expected to rise by 8.5 percent over 2017 to a record high, while coal production is also expected to reach an all-time high, rising by 7.3 percent year on year, according to the NEA.
China last month imported two tankers of U.S. liquefied natural gas, nudging open a doorway that had been closed shut for a month at a time when America is rapidly expanding its ability to export the heating fuel.
The effect of tariffs on industrial production is one of several unpredictable factors that will weigh on demand for the cleaner-burning fuel as the government tries to guard against winter shortages for the second year in a row.
With two more U.S. terminals slated to open in the first quarter of 2019, China’s re-emergence as a customer as wintry weather descends offers a much-needed outlet for exports.
Last December, many homes and schools in the smog-bound northeast were left in the cold after the government banned coal-fired heating before new gas networks could be completed in time.
“This is important because priced U.S. natural gas with the tariff is still economical compared to other sources,” said Het Shah, founder of Analytix. Consumption of coal accounted for 60.4 percent of China’s total energy consumption in 2017, down 1.6 percentage points over 2016.
The National Development and Reform Commission (NDRC) soon relented and allowed coal burning to resume, but the scramble for gas led to shortages and drove prices to record highs.
The NDRC planning agency has tried to tackle the problems by promoting more gas storage, more receiving terminals for imports of liquefied natural gas (LNG) and clearer guidelines for scrapping coal-fired boilers in the absence of adequate gas supplies.
Nevertheless, the Chinese push to reduce pollution will result in decreased coal consumption out of the total mix, with plans to lower it to around 59 percent this year, and to half of the energy mix by 2020 by increasing renewable energy production.
Natural gas consumption is expected to rise and account for 7.5 percent of the energy mix this year. Last month, the National Bureau of Statistics of China said that coal consumption last year ticked up 0.4 percent, crude oil consumption grew 5.2 percent, and natural gas rose 14.8 percent.
Clean energy consumption which China defined as natural gas, hydropower, nuclear power, and wind power accounted for 20.8 percent of energy consumption last year, up 1.3 percentage points over 2016.
According to the recently released BP Energy Outlook 2018 with estimates through 2040, China’s energy mix will continue to evolve with coal’s dominance declining from 62 percent in 2016 to 36 percent in 2040.
The world’s second largest economy imported a record 5.99 million tons of LNG in November even as its reliance on American LNG fell. U.S. imports reached 138,892 tons, according to data from China’s General Administration of Customs.
The Chinese push to cut pollution and make millions of households switch to natural gas from coal for heating resulted in China becoming the world’s second-largest importer of liquefied natural gas (LNG) in 2017, outpacing South Korea and second only behind Japan, the U.S. EIA said last month.
The Asian giant was forced to turn increasingly to the U.S. for the fuel after requiring both businesses and homes to stop burning coal to cut pollution. Chinese LNG imports surged 46 percent last year.
Despite the fact that China increased its domestic production and pipeline imports last year, natural gas shortages in northern China led to record levels of LNG imports during the winter.
Overall, natural gas imports accounted for 40 percent of China’s 2017 natural gas supply, and LNG made up more than half of those imports, the EIA said.
China has imported 60 cargoes from the U.S., or 12% of total shipments from the lower 48 states, according to U.S. Energy Department data going back to February 2016.