China Becomes More Independent In Energy Provision
Power sector distancing itself from reliance on fossil fuel imports
China is becoming more self-sufficient in energy supplies thanks to rising domestic oil and gas production in recent years, with the energy self-sufficiency rate reaching more than 80 percent in 2021, according to a recent report.
China's energy self-sufficiency rate has been on a steady growth track in recent years, with the country's total energy production rising to 4.18 billion metric tons of standard coal last year, up 2.5 percent year-on-year, according to the China Offshore Energy Report released by the CNOOC Energy Economics Institute, a think tank under China National Offshore Oil Corp－China's top offshore oil and gas driller.
The country's domestic crude and gas production reached a record high last year, with domestic crude production expected to reach around 198 million tons in 2021 and further increase to 200 million tons in 2022, thanks to joint efforts by the country's oil majors, including China National Petroleum Corp, China Petroleum and Chemical Corp and CNOOC, it said.
As all the major energy players have been boosting capital expenditure in oil and gas exploitation and exploration in recent years to ensure sufficient energy supply in the country, oil consumption also steadily recovered in 2021 to 726 million tons, mostly used in the transportation, refining, architecture and industrial sectors. It is expected to further increase to between 736 million tons and 761 million tons in 2022, said the institute.
On the other hand, it also pointed out that the country's oil and gas dependency remains high. China imported around 513 million tons in 2021 with its oil dependency reaching around 72.7 percent.
China's domestic gas production and gas imports have also been on the rise. Natural gas production reached 207.5 billion cubic meters last year, up 7.8 percent year-on-year, with imports reaching 170 billion cubic meters, up 19.4 percent year-on-year.
The gas dependency rate rose to 46.1 percent in 2021, with liquefied natural gas imports accounting for 65.9 percent and pipeline imports 34.1 percent.
LNG distributors in the country have been ramping up efforts in infrastructure facility construction in recent years. By the end of September, China had 22 LNG receiving terminals put into operation with a total receiving and uploading capacity of 88.6 million tons per year.
One new LNG terminal was put into operation in 2021－Jiaxing LNG terminal－with a receiving capacity of 1 million tons per year. Two LNG terminals finished scale expansion including Jiangsu Rudong terminal, which has a newly added receiving capacity of 2.25 million tons per year, and ENN Zhoushan LNG terminal with an expanded receiving capacity of 2 million tons annually, it said.
By the end of 2021, the receiving capacity of the country's LNG terminals is likely to have reached 93.85 million tons per year, it said.
Gas storage facilities have also entered a rapid development phase in China in recent years. By the end of June, China had 14 underground gas storage clusters that included 27 underground gas storage tanks. Working gas volume was around 14.7 billion cubic meters, up 9.2 billion cubic meters compared with that of 2015.
China's underground gas storage volume is expected to have reached 18.2 billion cubic meters in 2021, up 3.5 billion cubic meters compared with 2020, it said.
However, it only accounts for 4 percent of the country's total consumption and is way behind the global average of 12 to 15 percent, so there is a long way to go, said an analyst.
"Under a strong government push to enhance gas supply security, China further accelerated underground storage build-out in 2021 with the commissioning of three expansion projects and five new storage facilities," said Li Ziyue, an analyst with BloombergNEF.
"Nevertheless, the share of working capacity in total gas consumption is still much lower than the international average. More storage capacity needs to be in place to meet seasonal and regional rebalancing demand."
Luo Zuoxian, head of intelligence and research at the Sinopec Economics and Development Research Institute, said the country's major oil and gas players have been accelerating exploration investment intensity during the past few years with their mastery of oil and gas exploration technology gradually on the rise, which will further inject momentum into the reform of the country's future oil and gas systems and mechanisms.
With joint efforts by the country's oil majors, China has achieved several major breakthroughs in both conventional oil fields and unconventional oil and gas sectors, including major breakthroughs in Daqing Oilfield in Heilongjiang province and Shengli Oilfield in Dongying, Shandong province, both of which have helped ensure the country's energy security, Luo said.
Daqing, owned by Daqing Oilfield Co, a subsidiary of China National Petroleum Corp－the country's largest oil and gas company－hit a significant milestone in its annual tertiary oil recovery in December, which has exceeded 10 million tons over the past 20 years. The oilfield has also produced 286 million tons of crude oil so far, making it the world's largest tertiary oil recovery production base, after the company spent years developing a series of fully developed tertiary oil recovery technologies, also known as enhanced oil recovery, or the third stage used to extract oil from an oil reserve.
Daqing has been able to maintain sustainable and steady oil output on the back of its technological innovation during the past few years, Luo said.
On the other hand, the country has also been making major commitments to transitioning its energy systems toward renewables, especially power generation from solar, wind and hydro sources.
While coal still accounts for a 66.9 percent share of the country's energy mix, according to the National Energy Administration, renewables are steadily increasing, with 17.6 percent coming from renewable energy power generation and 3.1 percent from nuclear power, it said.
According to the report, clean and low-carbon energy has been rapidly developing in recent years and accounts for 25.6 percent in 2021, compared with 24.2 percent in 2020, 17.8 percent in 2015 and 13.4 percent in 2010. Natural gas accounted for 9.2 percent while nonfossil fuels accounted for 16.4 percent.
With energy consumption intensity continually decreasing, the institute estimates clean energy will further increase.
Carbon emissions related to energy are also entering a slow growth period, reaching around 9.97 billion tons last year, up 0.8 percent year-on-year and 2.6 percentage points lower than the energy consumption growth rate.
The institute estimates that the energy demand will maintain a slow growth during the 14th Five-Year Plan period (2021-25).
China's total energy consumption in 2022 is expected to be 2.5 percent higher compared with the previous year. The share of oil in China's energy mix will fall to 19.5 percent this year. The share of natural gas will increase to 9.5 percent and that of nonfossil fuels will rise to 17.1 percent, it said.
According to a recently released report by Royal Dutch Shell, as the top producer of renewable energy as well as the leader in electric vehicle manufacturing and use, China has an important role in global climate change solutions.
China's pledge in 2020 to achieve peak emissions by 2030 and carbon neutrality by 2060 is a defining moment in the global decarbonization journey toward a more sustainable future and Shell believes it is economically and technically possible for China to achieve its ambitions.
It suggests several key actions to make progress this decade to put China on the pathway to carbon neutrality by 2060, including investing in reliable, renewable-based electricity networks and demonstrating technologies that transform heavy industry through hydrogen, bioenergy as well as carbon capture, utilization and storage (CCUS).
Shell also highlighted the importance of beginning an orderly transition away from coal and accelerating action through integrated policies, sectoral coalitions and making cities incubators of change.
China will need to massively scale up its CCUS capacity by more than 400-fold in the next four decades, it suggests.
"China is critical to the world achieving the goals of the 2015 Paris Climate Agreement," said Mallika Ishwaran, chief economist, Shell International.
"The 2060 carbon neutrality target is challenging, but it also creates opportunities to position China as the global leader in low carbon manufacturing. With early and systematic action, China can deliver better environmental and social outcomes for its citizens while being a force for good in the global fight against climate change."
Regulator issues document to improve coal price formation
China's top economic regulator has released a new document to further improve the market- oriented coal price formation mechanism, in its latest move to ensure stable supplies and prices.
Under the new document, the National Development and Reform Commission said it will take key steps to guide coal prices to move within a reasonable range.
The NDRC said in a statement posted on its official website that improving the pricing mechanism will help stabilize market expectations, curb market speculation, avoid wild swings in coal prices, promote the coordinated and high-quality development of both upstream and downstream industries, and ensure stable energy costs for downstream enterprises.
"To further improve the mechanism, (the country) will not only give full play to the decisive role of the market in allocating resources but also give better play to the role of the government," it said. "Adhering to the principle that coal prices are formed by the market, (we will take measures to) guide prices to move within a reasonable range."
The new document said the country will take steps to improve the coal and electricity price transmission mechanism and improve the price control mechanism for coal.
More efforts will also be made to ensure reasonable and sufficient coal supplies, improve the medium and long-term coal contract system, strengthen management of market expectations, strengthen regulation of the futures and spot markets, and crack down on market violations.
With govt efforts, coal prices to ease as heating season ends
Rising coal prices in China are likely to ease gradually after the winter heating season concludes, while the government has also pledged to implement necessary measures to ensure both stable supplies and the prices of coal, industry experts said on Thursday.
While China's coal prices have crept up again this year partly due to tight supplies during the Spring Festival holiday and a recent ban on coal exports by Indonesia, they expect domestic coal supply to grow steadily in the short term and prices will gradually stabilize this year.
Thermal coal, which is mainly used to generate power, saw futures prices dive more than 2 percent on Thursday. The most-traded thermal coal futures on the Zhengzhou Commodity Exchange for May delivery ended at 843.6 yuan ($133) per metric ton in Thursday trade.
Chinese thermal coal futures dropped on fears of government intervention over escalating coal prices, as the country's top economic regulator reiterated the stance of stabilizing the coal market on Wednesday.
The National Development and Reform Commission and the National Energy Administration jointly held a meeting to arrange for stabilizing the coal market on Wednesday, warning some coal enterprises about inflated prices and urging producers to resume production as soon as possible, the NDRC said in a statement.
"Since mid-January, the price of thermal coal has risen by more than 25 percent," said Tao Jin, deputy director of the Macroeconomic Research Center at the Suning Institute of Finance.
Accelerated resumption of work and production of coal producers is expected after the meeting, Tao said, adding the domestic coal supply will expand and prices should stabilize. "As the weather warms up, coal consumption will also fall, leaving less room for swings and rallies in prices."
The NDRC said coal production in various regions rebounded rapidly since Feb 3 and has recovered to the pre-Spring Festival level. So far, coal stockpiles at the country's major power plants have hit over 165 million tons, up over 40 million tons over the same period last year.
Dong Xiaoyu, a researcher at the policy research center of the China Energy Research Society, said the meeting marked the government's latest move to guide market expectations in a timely manner and ensure coal market stability.
He attributed the recent price spike to factors including reduced market supply during the holiday, rising demand for power generation and heating, and the impact of the recent Indonesia coal ban.
However, Dong said the recent round of coal price increases is not supported by fundamentals, saying coal prices should gradually ease after the winter heating season.
Citing the NDRC's announcement on Wednesday to keep iron ore prices stable for the second time this year, Dong said the government's recent moves came over concerns that rising commodity prices will drive up China's producer prices and increase the cost for economic operations.
He said the moves will leave room for policies in the future, which will help effectively reduce the price of upstream raw materials, boost profitability for midstream and downstream firms and stabilize the overall economy.
Bai Wenxi, chief economist at IPG China, also said the meeting will help curb price gouging in the market as well as stabilize coal prices and supplies.
Looking into 2022, Bai said the country may face mounting pressures on rising commodity prices such as iron ore, coal, crude oil and agricultural products this year.
Considering the high base in the early stage and the gradual supply-side improvement, Dong forecast commodity prices will gradually ease this year.
http://www.chinadaily.com.cn/a/202202/10/WS6204824da310cdd39bc85dab.html
China will continue to keep coal prices stable, according to the country's top economic planner and energy department.
The National Development and Reform Commission and the National Energy Administration on Wednesday held a meeting to make further plans to stabilize coal prices.
The meeting issued warnings to companies that charged exorbitant coal prices and asked them to make rectifications.
Coal producers also should step up efforts to ensure coal supplies, the meeting said.
For those that fail to rectify any outstanding problems after being issued reminders, further investigation and accountability measures will be taken, the meeting said.
Local authorities should enhance their monitoring and maintain coal prices in a reasonable range, according to the meeting.
Measures to ensure sufficient coal for energy use pay off
China will mount an all-out effort to ensure coal production and keep coal prices at a reasonable level in 2022 after a tough year for energy production.
As measures to increase production have paid off, coal supply and demand have continued to improve, with green energy playing a big role in energy supply.
Previous efforts
The tight supply and high demand for power－a dilemma besetting China's power industry since the start of 2021－worsened in September and October due to the short supply and price hikes of coal. Multiple provinces then reported power rationing, with some regions experiencing power cuts.
Following the September power blackouts, the country stressed the importance of efforts to prioritize energy sufficiency. At an executive meeting of the State Council in late October, China ordered concerted efforts to ensure coal production and transportation, increase gas supplies and crack down on speculative activity in the market.
An improved pricing mechanism for coal-fired power was also released to deepen market-oriented pricing reform in the sector.
Since October, coal enterprises have also been promoting coal supply and stabilizing prices.
Huayang New Material Technology Group Co Ltd, a coal producer in Shanxi province－one of China's major coal-producing regions－has been improving its mining technology and operating at full capacity.
By Dec 22, 2021, Huayang had completed the shipment of 1.7 million metric tons of thermal coal to Hainan province ahead of schedule. These timely measures, at both the local and central levels, proved effective in restoring near-term coal supply and helped to gradually ease the strain on power generation, industry insiders said.
Spot prices and coal futures have fallen rapidly since mid-October as long-term supply contracts cover more coal producers while supervision was strengthened to rein in excessive speculation. By early November, power supply and demand in areas operated by the State Grid had returned to normal.
Smart mining helps
Intelligent technologies have become an important support in increasing the production and supply of coal.
Yulin－a coal-producing area in Shaanxi province－built 20 modern ultra-large coal mines with a capacity accounting for 50 percent of the city's total output.
At Shaanxi Coal Caojiatan Mining Co Ltd, an intelligent monitoring system connected to phone applications helps workers dispatch and monitor the real-time operation of equipment and the production process.
"With the help of the smart devices, the actual number of workers in a mining team has been reduced from 15 to seven. Now, just seven people can produce 3,500 tons of raw coal in two hours," said Li Peichen, a mining team Party chief with the company.
Also, a total of 154 intelligent mining areas have been built in Shanxi province, with the capacity of technologically advanced production accounting for 68 percent of the total.
Future steps
As the growth of global energy demand slows down and supply constraints ease, the mismatch between supply and demand is expected to improve this year, experts said.
Meanwhile, domestic coal supply capacity will be enhanced in 2022 as relevant government departments increase production capacity, they said.
In 2022, the medium and long-term coal contract system will be further improved.
Recently, a batch of long-term contracts was signed by coal enterprises from Shanxi, Shaanxi, Inner Mongolia and other places, together with some large domestic electricity, steel and heating enterprises, which will stabilize price expectations and promote stable energy supplies.
The country will also continue to increase the absorptive capacity of new energy, and optimize the use of coal and new energy. Large firms, especially State-owned enterprises, are working on the front lines to secure power supplies and stabilize prices.
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