A Booming Market and Strategic Partnership: Dr. Ruquan Lu on China’s Natural Gas Landscape and LNG Cooperation with Australia

At the 3rd Australia-China LNG Forum, Dr. Ruquan Lu, President of CNPC Economics & Technology Research Institute, delivered a comprehensive address on the rapid evolution of China’s natural gas sector and its expanding collaboration with Australia. His presentation offered both a macroeconomic view and data-driven forecasts, shedding light on future opportunities and challenges facing bilateral LNG cooperation.

China’s Natural Gas Market: A Historic Transformation

China’s natural gas consumption has surged from just 30 billion cubic meters in the late 1990s to over 422.2 billion cubic meters in 2024, achieving an average annual growth rate of 13% over the past 25 years. This transformation has made China:

• The third-largest gas consumer globally, after the U.S. and Russia.

• The largest importer of natural gas and LNG in the world.

Key consumption sectors include:

• City gas (46%)

• Industrial use (39%)

• Gas-fired power generation (15%)

• Chemical and fertilizer sectors (10%)

Key Growth Drivers

1. LNG Heavy Trucks

Driven by economic efficiency, LNG-powered heavy trucks are replacing diesel counterparts across China. In 2024, LNG truck sales reached a record 180,000 units, and LNG’s price per energy unit remained significantly lower than diesel—fueling a 47.8% year-on-year increase in vehicle gas consumption.

2. Power System Stability

Gas-fired power generation plays an increasingly critical role in supporting renewable energy and grid stability. With significant seasonal demand swings, natural gas complements solar and wind energy by providing reliable baseload and peak power. In 2024 alone, China added 19 million kilowatts of new gas power capacity.

3. Industrial and Emerging Sectors

China’s “new trio” industries—electric vehicles, lithium batteries, and solar products—are driving natural gas demand through their upstream supply chains, particularly in steel, glass, and non-ferrous metals.

Supply Outlook: Strong Reserves and Diversified Imports

While China produced 248.8 billion cubic meters of natural gas in 2024, it still depends heavily on imports, with a 43.6% external dependency ratio.

• Pipeline gas accounted for 41% of imports, primarily from Turkmenistan and Russia.

• LNG imports totaled 78.2 million tonnes, or approximately 108 bcm, with Australia remaining the largest supplier (34%).

China’s domestic production is also shifting toward unconventional sources—shale gas, coalbed methane, and tight gas—now making up 40% of output.

Forward-Looking Outlook: The “Golden Decade” and Beyond

According to Dr. Lu, China is entering a “golden decade” for natural gas:

• From 2025 to 2035, consumption is expected to rise rapidly, peaking around 620 bcm.

• Between 2035 and 2040, demand will stabilize at 600–650 bcm as natural gas integrates with renewables.

• Post-2040, demand will gradually decline, especially for city gas, but natural gas will continue to play a role in centralized, low-carbon energy systems via CCUS technologies.

Growth projections by sector for the next five years:

• Power generation: ~8% annual growth

• Industrial use: ~4.1% annual growth

• City gas: ~3.5% annual growth

• Chemical sector: ~0.5% stable use

LNG-Powered Future: Australia’s Role in China’s Energy Transition

Australia and China enjoy a robust energy partnership built on:

• 20+ years of cooperation since the Guangdong LNG project in 2002

• Seven long-term LNG contracts, totaling 20.2 million tonnes annually

• Australia as China’s top LNG supplier for over a decade

Strategic Advantages:

• Geographic proximity offers cost-effective and secure shipping.

• Australia’s LNG accounts for lower transport costs than suppliers like Qatar and the U.S.

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Key Challenges:

• Declining output from legacy fields like the North West Shelf due to insufficient reinvestment

• Rising domestic demand in Australia may limit future export volumes

• High transaction costs, making Australian LNG less competitive than pipeline gas or other global sources

Conclusion: A Mutually Beneficial Future Requires Renewed Investment

Dr. Lu emphasized that while China’s natural gas future is bright, price competitiveness and investment certainty are essential for sustaining Australia’s market share. He called for:

• More foreign investment in Australian upstream development

• Enhanced price transparency and cost controls

• Continued policy dialogue and joint research

As both countries navigate the evolving energy landscape, LNG remains not just a trade commodity, but a strategic pillar of bilateral relations.

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📌 ACERA thanks Dr. Ruquan Lu for his invaluable contribution to the forum and encourages members to explore collaboration opportunities in this dynamic sector.

🔗 For further updates, follow us at www.acera.org.au and on LinkedIn.