China calls for “orderly” growth in natural gas use draft policy

China’s National Energy Administration called for the “orderly growth” of natural gas usage in a draft policy released on Thursday, reaffirming an industry guideline that focuses on supply security.

China, the world’s biggest energy user, wants to boost the usage of natural gas as a key bridge fuel to reach its 2060 carbon-neutral goal, but it also wants to pace the growth of the sector to avoid supply shortages or get caught out by price shocks like last year’s spike caused by the war in Ukraine.

The draft proposes measures to improve how natural gas is priced, including through the implementation of a mechanism to link upstream and downstream prices, as well as differential gas pricing policies for regions of the country with large seasonal differences in demand.

The policy also designates priority users, which include households; city-gas users such as hospitals and schools and industrial consumers and power generators.

It also sets limits on consumption by some groups, including rural “coal-to-gas” heating projects that have yet to secure gas supplies or those located in low-income regions that can not afford the fuel which is normally more costly than coal.

The policy is to “orderly advance the use of natural gas” and optimise the consumption mix for the fuel to ensure energy security, the NEA said.

The government also discourages key coal bases in Inner Mongolia, Shaanxi and Xinjiang from using natural gas for baseload power generation.

Gas-based manufacturing of methanol and other petrochemicals are to be restricted.

The draft reiterates demands on local governments to improve the reliability of gas supply by trying to accelerate the construction of gas infrastructure and calling on suppliers and users to agree long-term supply contracts.

The proposal follows previous reforms to the country’s gas market and pricing this year, such as liberalising residential sales pricing for city-gas distributors.
Source: Reuters (Reporting by Andrew Hayley in Beijing and Chen Aizhu in Singapore; Editing by Himani Sarkar and Barbara Lewis and Miral Fahmy)