Specially Appointed Expert of the Society of Automotive Engineers of China

Deputy Secretary-General of the Sichuan Clean Energy Industry Association, Li Yongchang

China began the mass promotion of CNG in 1989, and it has been 27 years since then. The mass promotion of LNG started in 2006, and it has been 10 years to date.

As of the end of 2015, the number of natural gas vehicles in China had reached 5.19 million (including approximately 230,000 LNG vehicles). There were about 7,400 vehicle refueling stations nationwide (including over 2,650 LNG stations). Natural gas vehicles consumed over 33 billion cubic meters of gas annually. In summary, this has played a significant role in addressing air pollution represented by haze and improving China's energy consumption structure. Although there are still many challenges at the national policy level, price factors, and market level in promoting natural gas vehicles in China, fundamentally speaking, there are indeed numerous favorable conditions that can support the development of natural gas vehicles.

China's natural gas supply capacity is abundant.

In 2015, the country's natural gas production reached 135 billion cubic meters, and it is projected to reach 185 billion cubic meters by 2020. In terms of unconventional natural gas, shale gas production is expected to reach 30 billion cubic meters by 2020, coalbed methane will reach 30 billion cubic meters, and coal-to-gas production will reach 18 billion cubic meters.

The gas transmission capacity of Central Asian natural gas reached 55 billion cubic meters in 2015 and is expected to increase to 80 billion cubic meters by 2017. Specifically, Turkmenistan alone will supply China with 65 billion cubic meters of natural gas annually by 2021. Additionally, the China-Myanmar pipeline gas is expected to achieve a transmission capacity of 12 billion cubic meters per year during the 13th Five-Year Plan period

The gas transmission capacity of the China-Russia Eastern Route Pipeline is 18 billion cubic meters per year. In 2015, the receiving capacity of the 12 LNG (liquefied natural gas) terminals along China's coast reached 40.8 million tons (approximately 57.1 billion cubic meters). Notably, the first privately-owned LNG terminal, the Zhoushan Receiving Station operated by ENN Group, has commenced construction. With an annual receiving capacity of 3 million tons (4.2 billion cubic meters), it is scheduled to be completed by June 2018.

Therefore, by 2020, China's natural gas supply capacity is expected to reach 400 billion cubic meters or even 420 billion cubic meters without any significant challenges. However, achieving a consumption level of 300 billion cubic meters remains a considerable hurdle

Low-Cost Natural Gas Will Become the Norm

In the first quarter of this year, the global average price of natural gas was $2.25 per million British thermal units (MMBtu). In North America, the price dropped to $1.7 per MMBtu, the lowest in 17 years. On March 7th this year, India imported LNG from Qatar at a price of just $4.2 per MMBtu (approximately RMB 0.96 per cubic meter). The International Energy Agency (IEA) predicts that low natural gas prices could persist for the next 10 years.

Natural Gas Ceiling Price and Refined Oil Floor Price Policies Successively Introduced

On November 20, 2015, the National Development and Reform Commission (NDRC) issued a natural gas pricing policy, stating that starting from 2016, the gate station benchmark price could float upward by up to 20% with no lower limit, effectively establishing a ceiling price for natural gas.

Later, on January 13, 2016, the NDRC introduced the floor price policy for refined oil products: when the international crude oil price falls below $40 per barrel, domestic refined oil prices will no longer be adjusted downward.

The actual price trends indicate that oil prices are more likely to rise gradually, while natural gas prices still have room to decline. 

The Driving Force of Energy Structure Adjustment

Currently, natural gas accounts for about 24% of the world's primary energy mix, while in China, it only accounts for 6%, with significant regional disparities. For example, the Sichuan-Chongqing region reaches 15%, and Beijing even reaches 22% (unfortunately, it is rarely used as automotive fuel, with natural gas vehicles accounting for less than 0.2% in Beijing and 3% nationwide).The national plan aims for natural gas to account for over 10% of the energy mix by 2020; however, in North China, coal currently accounts for nearly 90%.The national plan further targets natural gas to account for over 12% by 2025 and over 15% by 2030.However, in 2016, the National Energy Administration planned to increase this share from 6% to just 6.3%, highlighting the long and challenging road ahead.It must be acknowledged that China failed to meet the 7.5% target set in the 12th Five-Year Plan for Natural Gas Development. Without significant measures, the 10% target in the 13th Five-Year Plan will also be difficult to achieve.In fact, vigorously developing natural gas vehicles is a highly effective measure that can yield twice the results with half the effort.

The Driving Force of Energy Structure Adjustment

Currently, natural gas accounts for about 24% of the world's primary energy mix, while in China, it only accounts for 6%, with significant regional disparities. For example, the Sichuan-Chongqing region reaches 15%, and Beijing even reaches 22% (unfortunately, it is rarely used as automotive fuel, with natural gas vehicles accounting for less than 0.2% in Beijing and 3% nationwide).The national plan aims for natural gas to account for over 10% of the energy mix by 2020; however, in North China, coal currently accounts for nearly 90%.The national plan further targets natural gas to account for over 12% by 2025 and over 15% by 2030.However, in 2016, the National Energy Administration planned to increase this share from 6% to just 6.3%, highlighting the long and challenging road ahead.It must be acknowledged that China failed to meet the 7.5% target set in the 12th Five-Year Plan for Natural Gas Development. Without significant measures, the 10% target in the 13th Five-Year Plan will also be difficult to achieve.In fact, vigorously developing natural gas vehicles is a highly effective measure that can yield twice the results with half the effort.

The Strong Launch of High-Grade Refined Oil Will Further Rationalize the "Oil-to-Gas Price Ratio"

Diesel that meets the National V emission standards was launched in more than ten provinces and cities in eastern China on May 1st this year, and will be implemented nationwide by the end of the year.Oil prices will naturally rise, and the price gap between oil and gas will widen accordingly, which will also benefit the promotion of natural gas vehicles.

Strong Momentum in Natural Gas Vehicle Technological Innovation 

Significant progress has been made in the lightweighting technology of CNG vehicle cylinders and long-tube trailer pressure vessels, and their working pressure is also expected to be upgraded.The application and demonstration of hydrogen-enriched natural gas (HCNG) technology are being actively promoted.Natural gas single-fuel car engines have passed road tests and are moving toward industrialization.Higher requirements will also be proposed for related industries such as CNG compressors, tank trucks, and gas storage systems.In summary, as long as we seize these numerous favorable conditions and earnestly promote the implementation of the "Energy Development Strategy Action Plan (2014-2020)", China will undoubtedly transform from a major natural gas vehicle country into a strong natural gas vehicle country and make greater contributions to human health.