Global Gas/LNG Research Current and Future Natural Gas Demand in China and India By Miranda Wainberg Senior Energy Advisor Michelle Michot Foss, Ph.D. Chief Energy Economist and Program Manager Gürcan Gülen, Ph.D. Senior Energy Economist and Research Scientist Daniel Quijano Economist and Research Associate April 2017 April 2017, BEG/CEE China/India Gas Demand, Page 1 TABLE OF CONTENTS ESSENTIAL ACRONYMNS, UNITS AND CONVERSIONS ................................................................................................... 5 ACKNOWLEDGMENTS .................................................................................................................................................... 6 PREFACE ......................................................................................................................................................................... 7 INTRODUCTION ............................................................................................................................................................. 8 MACROECONOMIC CONTEXT FOR NATURAL GAS IN CHINA AND INDIA ...................................................................... 9 Composition of GDP and Employment Structure ...................................................................................................... 9 GDP Growth and Industrial Structures in China and India ...................................................................................... 11 Industrial overcapacity and debt in China .......................................................................................................... 12 India’s Plans to Increase Share of Industrial Output ........................................................................................... 14 India’s Corporate Sector ..................................................................................................................................... 18 NATURAL GAS MARKET CHARACTERISTICS ................................................................................................................. 20 Historical Trends in Natural Gas Consumption ....................................................................................................... 20 Role of Natural Gas in Total Primary Energy ........................................................................................................... 22 Natural Gas Supplies ............................................................................................................................................... 22 Natural Gas Infrastructure ...................................................................................................................................... 25 China ................................................................................................................................................................... 26 India .................................................................................................................................................................... 29 Gas Supply Allocation Policies ................................................................................................................................. 31 China ................................................................................................................................................................... 31 India .................................................................................................................................................................... 32 Regional Gas Consumption ..................................................................................................................................... 33 China ................................................................................................................................................................... 34 India .................................................................................................................................................................... 35 Natural Gas Pricing .................................................................................................................................................. 35 China ................................................................................................................................................................... 36 India .................................................................................................................................................................... 42 Natural Gas Consumption Detail ............................................................................................................................. 46 Industrial Sector .................................................................................................................................................. 48 Considerations for Gas Use in the Industrial Sector in China ............................................................................. 67 Considerations for Gas Use in the Industrial Sector in India .............................................................................. 68 Electric Power Sector .............................................................................................................................................. 68 Installed Capacity versus Generation.................................................................................................................. 70 Considerations for Gas Use in Power Generation in China ................................................................................. 71 Conclusions on Chinese Power Sector Gas Use .................................................................................................. 77 Considerations for Gas Use in Power Generation in India .................................................................................. 80 Conclusions on Indian Power Sector Gas Use ..................................................................................................... 85 Residential/Commercial (Households): China ......................................................................................................... 86 Transport Sector - China.......................................................................................................................................... 88 City Gas Distribution and the Residential and Transport Sectors: India ................................................................. 90 NATURAL GAS AND ENERGY SECURITY........................................................................................................................ 93 SUMMARY AND CONCLUSIONS ................................................................................................................................... 96 REFERENCES ................................................................................................................................................................. 97 APPENDIX 1 - MAPS ................................................................................................................................................... 114 APPENDIX 2 – HISTORICAL AND FORECAST DATA ..................................................................................................... 118 IMPLICATIONS FOR AND FROM OUR RESEARCH FOR OUTLOOKS ............................................................................. 118 Discrepancies in Historical Data Series.................................................................................................................. 119 Natural Gas Demand Forecasts ............................................................................................................................. 123 LIST OF TABLES Table 1. Stalled Projects (by value) as a fraction of GDP ............................................................................................. 17 Table 2. Snapshot of China and India Natural Gas Supplies ........................................................................................ 23 April 2017, BEG/CEE China/India Gas Demand, Page 2 Table 3. Natural Major Gas Pipelines in China ............................................................................................................ 26 Table 4. 2012 National Gas Utilization Policy in China by Customer Type .................................................................. 32 Table 5. Gas Utilization Policy in India (2013).............................................................................................................. 33 Table 6. China Natural Gas Prices as of March 2016 in US$/MMBtu .......................................................................... 37 Table 7. West-East Pipeline Transmission Tariffs in China .......................................................................................... 38 Table 8. Other Industrial Sector Gas Use in China 2014 (BCM) ................................................................................... 63 Table 9. Urea Production Capacity by Feedstock ........................................................................................................ 65 Table 10. Incremental Urea Fertilizer Natural Gas Demand above 16 BCM ............................................................... 66 Table 11. Forecast Average Annual Growth Rates of Electricity Consumption in China and India ............................. 69 Table 12. Renewables Electric Generating Capacity GW ............................................................................................