CNPC chief says stronger network will help avoid shortages in winter months

China should strengthen its natural gas storage and transportation facilities to cope with the higher consumption of clean fuel as the government strives to curb air pollution in the country, a top industry official said.

China should step up its strategic reserves of natural gas and come up with more gas storage facilities to avoid gas shortages in the winter, with logistics being one of the major constraints, said Wang Yilin, chairman of China National Petroleum Corp (CNPC), the country's largest oil and gas producer by annual output.

The government should also come up with incentives to encourage the exploration of shale and tight gas in the country, so as to increase domestic yield, said Wang, who is also a member of the 13th National Committee of the Chinese People's Political Consultative Conference.

China's efforts to fight air pollution have led to increased need of heating fuel in many northern cities during the past winter, boosting domestic natural gas prices to a three-year high.

Industry insiders expect China's northern regions to face similar gas shortages later this year.

He Lifeng, minister of the National Development and Reform Commission, reiterated the government's efforts to step up construction of gas storage facilities in the country, including liquefied natural gas storage tanks and gas pipeline networks that transport gas from the south to the north.

"We supplied 237.3 billion cubic meters of natural gas in 2017, 30 billion more than the previous year," he said during a news conference in Beijing on Tuesday.

"The government will focus more on domestic exploration of shale and tight gas while ensuring more overseas long-term gas purchase deals with neighboring countries, including Central Asian countries, to ensure domestic demand."

Analysts said China should continue boosting its domestic gas production while importing more natural gas from abroad to meet the ever-increasing domestic gas demand.

Li Li, research director at energy consulting firm ICIS China, said China's import of gas currently accounts for more than 30 percent of domestic consumption, and the figure is expected to continue rising.

"One of the most significant contributors to the gas shortage is the limited capacity of distributed gas storage infrastructure," she said.

"It's necessary for China to come up with massive gas storage facilities to avoid large-scale gas shortages, which is very likely to happen in face of cold snaps."

According to the NDRC, in case of similar gas shortages in the future, the government will ensure civilian use of natural gas, while asking State energy majors China National Petroleum Corp, China Petroleum & Chemical Corp and China National Offshore Oil Corp, to cut natural gas supplies to some industries, including chemical, methanol and fertilizer producers.

CNPC produced 103.3 billion cu m of natural gas in 2017, a year-on-year increase of 5.3 percent. It has also vowed to continue negotiating with gas-rich countries for more cost-efficient imports.