Second Asia Gas Buyers’ Summit Feb.2-3 , 2004 , Mumbai, India

1. Second Asia Gas Buyers’ SummitFeb.2-3, 2004 , Mumbai, India Gas Demand - Supply Outlook in China LIU Xiaoli Energy Research Institute, National Development Reform Commission

2. ERI Contents • China’s Gas Market Today • China’s Gas Demand - Supply Outlook • Challenge for Gas Development

3. ERI China’s Gas Resources Total Geo. 38 tril.m3 Accumulated output:309 BCM（as of 2001） Provenrecoverable reserves : 2 tril m3 Resources Recoverable 10.5 tril. m3 Remaining reserve available: 1.6787 tril m3 （as of 2001） Proven recoverable to be determined: 8.5 tril m3 China has abundant gas resource but its exploration rate is comparatively low China has great potential in natural gas exploration and exploitation.

4. ERI Major gas fields in China

5. ERI China’s Gas Market Today Since 1990, China’s gas exploration and development have made great achievement. By the end of 2001, China’s remaining recoverable reserves reached 1678.7 billion m3 and increased 716.8 billion m3 compared with that of 1998, and increased 328.2 billion m3 compared with that of 2000. At present, 5 large-scale gas resources areas (Sichuan, Erdos, Tarim, Chaidamu, South China Sea) have been formed. 1200 1000 800 3 billion m 600 400 200 0 1950- 1953- 1958- 1963- 1966- 1971- 1976- 1981- 1986- 1991- 1996- 1952 1957 1962 1965 1970 1975 1980 1985 1990 1995 2000 Newly added proven gas reserves was over 1100 billion m3 during 1995-2000，The newly discovered gas fields of large- and medium scale had 28.

6. ERI China’s Gas Market Today Along with the development of gas fields and construction of gas pipelines (Ya 13-1  Hongkong, Jingbian  Beijing) in China since 1990 , China’s gas production grew very rapidly. Gas production in 1996 was over 20 billion m3 and was over 30 billion m3 in 2001. In 2002, gas production amounted to 31.6 billion m3 and set a top record in the history. At present, China’s gas production ranks the 19th in the world. Newly added proven gas reserves was over 1100 billion m3 during 1995-2000，The newly discovered gas fields of large- and medium scale had 28.

7. ERI China’s Gas Market Today

9. ERI Characteristic of Gas Consumption • Share of gas in China’s primary energy consumption mix has been about 2% since 1985. • Gas annual consumption growth rate was 6.2% (1990-2002). • Gas is mostly being used in industrial sector, but the structure of gas consumption has been changing in recent years • Place-of- production consumption is the main pattern of the country’s gas consumption.

10. ERI Gas Consumption by Sector in China Year 2000 Year 2002

11. ERI Major Factors for Gas Demand Growth • The rapid development of China’s economy in next • decade and improvement of living conditions. • The optimization of China’s energy consumption • structure • To mitigate the impact caused by insufficiency of • domestic oil supply • Pressure from environmental protection • The West-East Gas Pipeline Project and LNG project

12. ERI Natural Gas Demand Forecast • It is estimated the average growth rate of gas will be above 10% during the next two decade • It is estimated that the share of gas in the total energy demand will be increased from 2.5% of 2000 to around 7% of 2010 and to 11-12% of 2020 • The demand for gas will reached 100 - 120 billion cubic meters in 2010 and 200 - 250 billion cubic meters in 2020

13. ERI Future Natural Gas Demand by Sector Year 2010 Year 2020

14. ERI Characteristic of Future Natural Gas Demand • Power sector and city gas sector will be two largest gas consuming sectors in the future, they make respectively up one-third of national total; • The demand for gas in Yangtse Delta, the South-east coast, Bohai Bay will increase quickly compared with other areas of China in the future, they account for 55%-60% of national total.

15. ERI Future Natural Gas Supply • It is estimated that Domestic natural gas production will be70-80 BCM in 2010 and be 110-120 BCM in 2020; • Major areas of producing domestic natural gas in the future will be Tarim basin, Erdos basin,Sichuan basin, South China Sea • Importing pipeline gas and LNG

16. 300 demand 1 demand 2 250 250 production 1 production 2 200 200 150 110 120 100 120 100 64.5 80 60 70 25.7 50 50 26. 257 0 2000 2005 2010 2020 Projection of Gas Supply & Demand in China Unit:bcm over 20 billion cubic meters of gas will be imported in 2010 and over 100 billion cubic meters of gas will be imported in 2020

17. ERI Future Natural Gas Pipeline Outlook • year 2005: West to East gas pipeline, • Second pipeline of Shaanxi-Beijing, • Zhongwu pipeline, • Jinghu pipeline, • Guangdong LNG and associated pipeline • year 2010: East Siberia in Russia to China • Fujian LNG project • East Sea gas pipeline • South Sea gas project

18. ERI Challenge for Gas Development • Development strategy for gas industry needed • National natural gas infrastructure needed; • Downstream market nurtured and developed; • Competition between gas and other energy sources; • Pricing mechanism;

19. ERI Challenge for Gas Development • To complete regulation & legal framework for the development of gas industry, focusing on definition of general objectives, transportation, distribution, marketing, government regulation; • To introduce competition mechanism into production and marketing sectors by diversifying supplying sources, building up competitive pricing system and providing equal access opportunities to all gas suppliers • To reform town gas network and optimize distribution system

20. 谢 谢 THANKS