China’s Gas Growth Casts a Shadow over LNG Demand
China is boosting domestic natural gas production, and it is doing it fast. A major LNG consumer—and importer—the country has been key in LNG demand forecasts. Now, these forecasts will need to be revised.
Less than ten years ago, China was struggling to get its domestic gas production off the ground, especially in shale formations. China’s shale geology is different from the U.S. basins, and energy companies were finding it difficult to get commercial production going. Now, China’s state oil and gas majors are pumping more gas than ever and announcing new discoveries in the shale patch.
In November last year, China produced 22.1 billion cu m, which was a 7.1% increase on the year, Kpler reported this month citing official production data. The increase was driven by “faster-than-expected shale gas ramp-ups in the Sichuan Basin.” Based on that data, the energy analytics firm expects China’s total for 2025 to reach 263 billion cu m, rising to 278.5 billion cu m this year, again thanks to growing shale gas production in the Sichuan and Shanxi basins.
As with oil, rising domestic production would inevitably affect imports, even as China leans more heavily on natural gas for emission-reduction purposes. Last year, for instance, China booked higher domestic gas production and a rather substantial decline in LNG imports. In fact, imports of liquefied gas last year fell to the lowest in six years after a string of 12 monthly declines in a row. Imports only rebounded at the end of the year but not enough to reverse the decline. Kpler has predicted that Chinese demand for liquefied natural gas is going to decline this year as well, with shale gas production removing some 600,000 tons of LNG demand, reducing the total to 73.9 million tons.
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Now, 600,000 tons is not a whole lot in the context of a market where the United States alone exported over 100 million tons last year. But it does serve as yet another evidence of a trend in China to reduce dependence on energy imports, which has implications for global energy commodity markets that have gotten used to relying on China as the ultimate driver of demand.
The projected decline in China’s demand for gas—and by extension LNG—may interfere with new LNG capacity addition plans and prices, shrinking producers’ profits. It is these plans for a wave of new LNG supply, set to come online by the end of the decade, mostly from the top exporters, the United States and Qatar, that have prompted many analysts to expect an oversupplied LNG market by 2030 that would weigh on prices.
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