China’s 12th Five-Year Plan (2011-2015) promotes natural gas as a clean energy source and prioritises Sino Gas’ PSCs for accelerated development.

Forbidden-City“Strengthen the exploration and development of petroleum and natural gas resources, stabilize domestic petroleum output, and promote the rapid growth of natural gas output, and the development and utilization of unconventional oil and gas resources, such as coal-bed gas and shale gas.”

– English translation of 12th Five Year Plan

In its 12th Five-Year Plan, China has signalled its intention to shift from a policy of maximizing growth to balancing growth with social harmony and environmental sustainability. One element of this is the continued promotion of natural gas as a clean energy source.

More favorable gas pricing has begun to be rolled out nationally to support the domestic production of natural gas, as discussed in greater detail here.

Of particular note in the 12th Five-Year Plan was the earmarking of the eastern fringe of the Ordos Basin for accelerated development, on which Sino Gas’ PSCs are located.

The National Action Plan on Air Pollution (commonly referred to as the “Clean Air Action Plan”), announced in September 2013, further supplements the 12th Plan’s promotion of natural gas as a clean energy source.

By 2017, the Government targets reductions in annual average PM2.5 concentrations by 15-25% in the three key regions surrounding Beijing, Shanghai and Hong Kong/Guangzhou and 10% in all other second- and third-tier cities compared to 2012 levels. One of the key measures announced is to reduce absolute coal consumption in these three key areas. Combined with caps on coal consumption in Shandong province, these areas represent one third of all coal consumption in China. Substituting natural gas for coal is the main focus for achieving these targets.

The 13th Five Year Plan is expected to be approved in March 2015. The Draft 13th Five Year Plan continues to keep the development of natural gas as a “priority” within country’s energy planning.

As a precursor to the release of the 13th Five Year Plan, the State Council published a new Energy Development Strategy Action Plan (2014-2020) on November 19, 2014.  The stated goals of the policy are to provide more efficient, self-sufficient, green and innovative energy production and consumption. We see the plan as providing continued support to promoting natural gas as a cleaner and more affordable part of the energy mix in China as well as the promotion of domestic supply to meet this demand.  Sino Gas is proud of the role we can play to help China achieve these goals.

Key points of the plan with regards to the natural gas industry include: Capping annual primary energy consumption at energy equivalent amount of 4.8 billion tons of standard coal with total coal use capped at 4.2 billion tons, increase Natural Gas share of energy mix to over 10% by 2020, source 85% of energy from domestic sources, establish eight new natural gas production bases by 2020, each capable of producing 10 bcm/year, increase unconventional gas production to 60 bcm, focus on the eastern margin of the Ordos basin to increase support and accelerate the pace of exploration and exploitation of CBM, breaking the bottleneck in production of unconventional natural gas as soon as possible, increase availability of natural gas to urban residential sector, build out infrastructure for the use of natural gas in the transportation sector, orderly development of natural gas fired peaking power plants, combined heat base load and gas – steam combined cycle cogeneration in the key areas of control for air pollution (Beijing, Shanghai and Guangzhou and surrounding areas).