China signed a protocol with Russia October 18 on purchasing 20 billion cubic meters of natural gas from the Kovykta oil field each year beginning from 2008. As is known from the China National Petroleum Corporation (CNPC), the project, with a yearly gas supply volume two times that of the nation's "West-East Gas Pipeline Project", has helped to outline the strategic pattern of China's natural gas development.

Peak Year of Gas Exploitation

The year 2002 has become a peak of China's gas exploitation. The "West-East Gas Pipeline Project", the "Zhongwu Line" which pipes gas out of Sichuan Province, and cooperation with overseas oil fields have clearly blueprinted the nation's gas network.

The "three vertical" trunk lines of China's-China-Russia line, West-East line and Zhongwu line-have primarily shaped, said a CNPC manger. Taking account of gas introduced in from abroad by Sinopec and CNOOC, a new pattern has been formed.

Meanwhile, Sinopec and CNOOC have accelerated their steps to tap overseas markets. Sinopec is seeking deals with oil fields of Southeast Asia, Europe and Africa, and in recent years CNOOC stepped up its liquefied natural gas (LNG) project, including an 1110 billion cubic meter purchase agreement with Australia.

Gas Project with Central Asia Countries

By now China has conducted fruitful bilateral energy cooperation with four Central Asia countries and Russia, which laid solid foundation for wider cooperation among these countries in the fiend of energy and others.

Currently CNPC's project with four Central Asia countries is under busy talks, source close to CNPC confirmed, adding that the final establishment of West-East pipeline will facilitate the introduction of natural gas from Central Asia. A 2000-kilometer pipeline linking Central Asia and West-East pipelines will be built if the project is decided.

In the coming five years China's overseas expansion of oil industry should concentrate in the three strategic areas as Central Asia, Russia, Middle East and North Africa, South America. According to the Institute of Japan Energy Economics, strengthened exploitation is indispensable by China in countries as Russia, Kazakhstan, Turkmenistan, Iran, Iraq, Sudan, Venezuela and Indonesia in a bid to increase production and reserve volumes, set up overseas bases and diversify suppliers.

Historical Revolution of Consumption

China has long remained at a low level in natural gas consumption. Statistics show that natural gas has taken 23.8 percent in the structure of primary energy consumption in the world, while the figure for China only stands at 22 percent.

In recent years China's energy consumption has leapt to world second place. As pointed out by the 2002 BP Statistical Review of World Energy, there is still a strong need for natural gas in Asia, and the growth rate for that of China is as much as 12.9 percent. While according to statistics by authority departments, based on current market demand-and-supply relations, by 2005 China will face a yearly shortage of 20 billion cubic meters, and the figure will be up to 100 billion by 2020.

( November 1, 2002)