China's natural gas production predicted to jump 4%

Thanks to tighter environmental laws.

China's natural gas production is poised to grow by 4.0% y-o-y in 2017, as tighter environmental laws and favourable government policy for natural gas development lead the country's state-owned producers to channel investment towards natural gas projects, at the expense of oil, according to BMI Research.

The upward momentum in the Chinese natural gas sector is underpinned by Beijing's continued push to increase domestic natural gas consumption, to displace higher carbon energy sources such as coal.

China is seeking to boost the share of natural gas in its primary energy mix from 6.0% currently to 10.0% by 2020, as its ongoing battle against severe air pollution intensifies.

Here's more from BMI Research:

In March, CNPC announced plans to increase its total natural gas production to 100.0bcm for 2017, a 2.0% y-o-y increase compared with the 98.0bcm produced in 2016.

The bulk of growth will likely come from stronger output at some of the firm's larger gas assets, including the Changqing, Sulige and Anyue gas fields, as well as improving unconventional gas production at its coal-bed methane (CBM) and shale gas blocks in the Sichuan basin.

This will be matched by China's other state-owned giant Sinopec, which reported 4.7% y-o-y growth in its natural gas production in 2016.

Although the SOE has recently lowered its oil production target at one of its largest oilfields, we expect the firm to maintain investment into natural gas projects over 2017, in keeping with the government's cleaner-energy agenda. Specifically, the firm is looking to double the annual shale gas production capacity at its Fuling shale gas project, Chongqing, over subsequent months from 5.0bcm to 10.0bcm.