Gas use is soaring in China. Starting from 865 Bcf in 2000, it increased by almost four-fold to 3.18 Tcf in 2009, and in a rapidly increasing energy consumption from all sources, gas’s share of primary energy went from 2% to 4%.

By 2020, gas consumption will likely exceed 10.6 Tcf, and provide about 10% of primary energy consumption. This natural gas increase, outpacing the already torrid rate of total energy increase, will last at least until 2030.

China has been trying to put some semblance of order in the red-hot natural gas business. While from 2000 to 2008, China’s gas demand increased by an average of 16.2% per year; gas production increased by only 13.2% per year. In 2009 domestic gas production was 2.93 Tcf, or about 92% of total consumption. It is impossible for domestic gas production to meet the growing demand. The obvious answer: more gas imports. There are two ways to do it, one is to get gas from Russia and Central Asia through pipelines; another is to import LNG. In 2009, China imported 3.5 million tons of LNG (or 17.7 Bcf).

Last month, the gas transported through the China-Central Asia natural gas pipeline has been over 350 million cubic feet per day. This is the first transnational pipeline bringing gas t China. The pipeline starts at the borders of Turkmenistan and Uzbekistan, goes through middle Uzbekistan and south Kazakhstan and enters China in Horgos in Xinjiang Province. The total length is 1,833 kilometers. The pipeline connects with China’s Second West-East gas pipeline after it enters the country. Since the start of gas flow on December 15, 2009, the transnational pipeline has brought about 33.5 Bcf of gas to China. It is expected that the amount will reach 205 Bcf this year.

When the project is finished with a full suite of operating compressors, the full pipeline capacity will be 1.06 Tcf per year. The gas will be from two sources, 460 Bcf from blocks by the Amu River owned by PetroChina, and 600 Bcf from Turkmenistan.

By the end of 2009, China had 36,000 km of natural gas pipeline with a transport capacity of 3.53 Tcf per year. However, China plans to go on a massive buildup of gas pipelines over the next few years. From 2009 to 2015, 24,000 km of trunk lines and 8,000 km of branch lines will be built. Local distribution pipelines will be constructed at a pace of 20,000 to 30,000 km per year. He Runmin, the secretary general of the China Petroleum Society Natural Gas Commission, said that China has been pushing for the fast construction of natural gas pipeline, and will build 300,000 km gas pipeline in the next 12 years.

While the infrastructure numbers are impressive there are still big hurdles for China’s natural gas development. One is the oligopoly of the upstream exploration and development and importation. The second is the shortage of pipelines in the midstream. Finally, there is the dysfunctional pricing system in the downstream which we described in a recent article here. Those hurdles must be smoothed out if China’s massive natural gas development will go without a serious hitch.