Market overview.
China gas market overview
Natural gas is China's fastest growing major energy source. The Chinese gas market is still comparatively small, with gas consumption per capital of around 0.04 thousand cubic metres, compared with 2.07 thousand cubic metres per capita in the U.S.
Given this low per capita gas consumption and the high rates of expected economic growth over the coming decades, there is large potential for growth in Chinese gas consumption as it services rapidly growing power, city gas and industrial sector demand. China presents a significant opportunity for Dart Energy with strong expected growth in gas demand, establishing supporting infrastructure and attractive netback pricing.
Currently, proved developed gas reserves in China are estimated at 30 Tcf with proved developed and undeveloped reserves estimated at 68 Tcf. Estimates suggest that China's undeveloped gas resource base could be in excess of 1,800 Tcf with 80% found onshore. The Chinese market is state sanctioned with PetroChina holding a leading position in the upstream gas business with approximately 83% of China's reserves, followed by Sinopec with 9% and CNOOC with 7%.
Gas supply in China is serviced by domestic production supplemented by increasing Liquified Natural Gas (LNG) and pipeline imports. Including imports, total gas supply is projected to rise to over 10 Tcf per annum by 2025.
Whilst China is evolving into a market economy with prices for most commodities being market set, natural gas is considered an "energy commodity" and the Chinese government has largely maintained price control with natural gas prices remaining comparatively low.
The Chinese Government has, however, recognised the need for price reform and it is expected that the wellhead price for natural gas will be set by market forces in the future. If current international oil and gas prices rise in the long term, gas prices in China is expected to rise substantially.
The Government has shown significant interest in developing the gas market as a cleaner source of energy and has made considerable investments in exploration, production, pipelines and processing plants. Import projects for LNG and pipeline gas are also under development.
CBM market overview
Compared to other Asian markets in which Dart Energy operates, China has a relatively long history of CBM development with total CBM resources estimated at 1,250 Tcf.
Currently there are approximately 25 Chinese companies holding CBM licences, including PetroChina, Sinopec, China United Coalbed Methane ("CUCBM") as well as other entities including smaller local CBM companies, coal mining companies and geological bureaus. CUCBM and PetroChina own the majority of Chinese CBM licences.
Unlike conventional natural gas, CBM pricing is not regulated, thereby allowing CBM producers to compete for market prices. There are 13 major coal-bearing basins in China where large CBM resources are concentrated. Dart Energy has conducted extensive studies on all of the key CBM basins in China.