China Is Drilling Deeper to Hold Its Import Share Down. Shale Will Not Free It From LNG

China's gas market grew strongly again in 2023. Consumption rose 7 per cent, or 2.6 billion cubic feet a day, after a small decline in 2022 when zero-COVID measures slowed the economy. Every sector used more gas. Residential and commercial demand rose 8 per cent, power sector demand 10 per cent. China also became the world's largest LNG importer again, taking 9.5 Bcf/d, 13 per cent more than a year earlier. Beijing's response to that growth has been consistent for a decade: produce more at home to limit the share supplied by imports.

Domestic production supplied 58 per cent of China's gas in 2023, averaging 21.7 Bcf/d, up 6 per cent on 2022. Output has grown by more than 1.0 Bcf/d every year since 2017, mostly from conventional reservoirs and associated gas from oil production, with a rising contribution from tight gas, shale and coalbed methane. Imports averaged 16.0 Bcf/d and supplied 42 per cent of the market, up from 15 per cent in 2010. That increase in import dependence over 13 years is what drives policy.

Imports arrive by pipeline, from Central Asia, Myanmar and Russia through Power of Siberia, and as LNG. In 2023 China's largest LNG suppliers were Australia, with 34 per cent, Qatar with 23 per cent, Russia with 11 per cent and Malaysia with 10 per cent. China's shale gas output averaged 2.51 Bcf/d in 2023, up from 0.02 Bcf/d in 2013. That growth reflects better geological understanding and improved fracturing and automation techniques. The deeper Low Cambrian discovery matters because it opens a new layer beneath existing fields.

CNPC's Zi 201 well reached commercial flow rates from beyond 14,760 feet. Three features of Chinese shale limit how far it can reduce import dependence. Chinese shale formations are deeper, more faulted and more tectonically complex than the major US plays. China's gas strategy is a portfolio: maximise domestic production, add pipeline imports, and use flexible LNG to balance.