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Developing natural gas in China

The Scenarios team has produced a joint study with the Development Research Centre (DRC) of China’s State Council to examine how natural gas could evolve as a mainstream energy source in China. 

Natural gas is the ideal alternative to coal, as it is cleaner, more efficient and easier to transport and store. But although its use globally has grown rapidly over the last decade or two, gas has significant challenges to overcome before it can become a core component of China’s energy system.

The Shell-DRC study sets out a strategic aim to increase the share of gas in the energy mix to 10% in 2020 and 15% in 2030, up from 5.8% in 2014. This reflects the goals set out in China's Twelfth Five Year Plan and the 2016 Paris Agreement on climate change.

Markets alone will not be able to deliver this increase in the share of gas, and additional policy frameworks and incentives will be required.  Based on detailed economic modelling, the joint study has put forward recommendations for strengthening environmental regulations including effective carbon pricing. The study also recommends comprehensive reform of gas market mechanisms, regulations, and institutions, including greater competition in upstream gas exploration and production, diversifying sources of imported gas to drive greater competition in wholesale and retail gas markets, and effective regulation of gas transmission and distribution infrastructure to ensure third party access on competitive terms. 

The study was a key input into China’s Thirteenth Five Year Plan.

China’s Gas Development Strategies (PDF, 16 MB)