Coal-to-Gas Reform Boosted Natural Gas Consumption in Shandong

On October 10, 2017, Shandong Government issued the Implementation Suggestions on Clean Energy-Based Urban Residential Heating and Further Heat Metering Reform, and the circular indicated to accelerate the elimination and upgrade of the coal-based heating system and implement gas-based or electric-based heating according to local conditions. Referred to the gas supply, the government suggested the multi-source gas supply such as the distributed energy, hanging furnaces and gas boilers to comprehensively utilize the natural gas resources.

In the past years from 2013, the natural gas consumption grew rapidly in Shandong, and it broke through the threshold of 10 billion cbm (357,000,000 mn Btu) in 2016. The natural gas proportion in primary energy consumption expanded from 2.6% in 2012 to 6.4% in 2016. The main gas sources of Shandong are the West-to-East Pipeline Phase II, Yi-Ning Pipeline, Qingdao Terminal and Tianjin Terminal.

In 2017, as one of the most important provinces in the air pollution control and coal-to-gas reform, the natural gas consumption of Shandong also boosts in line with the national average or even exceeded. Especially when many cities are included into the coal restriction area in winter heating, such as Jinan, Heze, Liaocheng, Zibo, Tai’an, Dezhou, Binzhou, etc., the natural gas consumption volume skyrocketed.

On the other hand, Chinagas also signed strategic cooperative frame agreement with Shandong Housing and Rural-Urban Development Bureau to promote the coal-to-gas reform in unban and non-urban areas in Shandong, eliminate and upgrade coal-based boilers and build natural gas-based heat power stations and LNG filling stations.

Therefore, it is foreseeable that in the upcoming winter peak season for natural gas consumption, the natural gas market in Shandong will continue to thrive with an over 20% increment as estimated, and the consumption volume of 2016 is likely to break 12 billion cbm (428,400,000 mn Btu) in 2017. However, from another perspective, the supply pressure and price fluctuation will become more violent in this winter.