China has begun giving extra incentives for domestic natural gas production as its gas imports continue to increase to support its expanding economy and energy consumption, according to U.S.' Energy Information Administration (EIA) on Wednesday.
"Rapid growth in China’s natural gas consumption has outpaced growth in its domestic natural gas production in recent years," the EIA said in a statement.
"To increase domestic production of natural gas, the Chinese government has introduced incentives for several forms of natural gas production," it added.
According to the EIA, in June 2019, the Chinese government introduced a subsidy program that established new incentives for production of natural gas from tight formations and extended existing subsidies for production from shale and coalbed methane resources.
"This subsidy is scheduled to be in effect through 2023. In addition to the changes in the subsidy program, the government allowed foreign companies to operate independently in the country’s oil and natural gas upstream sector," the EIA added.
China’s natural gas imports, both by pipeline and as liquefied natural gas (LNG), accounted for 45% of China’s natural gas supply in 2018, which stood at 15% in 2010.
The country's natural gas production rose in recent years with increasing output of tight gas and shale gas. In 2018, China’s domestic natural gas production averaged 15 billion cubic feet per day (425 million cubic meters per day).
China has set a target of 19.4 billion cubic feet per day (550 million cubic meters per day) for domestic natural gas production in 2020, the Chinese State Council said in September 2018.
Although producing natural gas from tight gas formations was not widely carried out until 2010 in China, companies started to adopt active drilling programs since then to lower the cost of drilling in vertical wells and improve their productivity, according to the EIA.
"Production of tight gas, shale gas, and coalbed methane collectively accounted for 41% of China’s total domestic natural gas production in 2018," it added.
By Ovunc Kutlu