Key areas of demands

Industrial

At present, 50% of China’s gas demand comes from industrial customers, which analysts see as the main drivers of demand growth over the next decade. However, power generation and transport are set to see stronger growth from a currently lower base, while the share for residential remains stable.

Power generation

Coal currently dominates China’s power generation capacity mix with 70%, followed by hydro with 20%, wind/solar at 5%, gas at 2%, and nuclear 1%. The target of the 12th Five-Year Plan which ends in 2015, is to lower the share of coal in the mix to 64%, doubling the gas share to 4%. Some analysts estimate a power generation market share of 6%, or 3,000 BCF by 2020, 22% of the overall demand.

Transport

China has seen one of the strongest growth rates in the world in new vehicle sales, with commercial vehicles in particular likely to require alternative technologies for the growth to remain sustainable. Natural gas vehicles are strong candidates to replace diesel fleets, both in terms if quick pay-back and lower emissions. At commercial vehicle numbers expected to reach 44m by 2020, and a 11% compound annual growth rate estimated for natural gas vehicles, the country could see as many as 3.5m natural gas vehicles in operation by 2020 – a market with huge potential and considerable unmet demand.

Environment

China is at the forefront of the global carbon debate, as the largest and fastest growing CO2 emitter among the major countries in the world. In the background, its local air quality is rapidly deteriorating, with particulates emissions in China 30% above the world average and more than three times the levels in Europe and North America. These elevated CO2 emissions are driven by China’s reliance on coal in its power generation and industrial sectors. The government drive to move the energy mix away from coal and towards gas.