The Worldwide Investor

In another sign of China’s burgeoning economy, the China Petroleum and Chemical Industry Association reported that output of natural gas in the country grew at an astounding 23% in 2007. This gain was on top of a 19% gain the year before and puts China’s total natural gas output at 58 billion cubic meters for the year ending 2007.

The clean burning fuel has been at the center of many debated energy policies in China and the rest of the Asia as economic growth has fueled a pollution problem that many say hampers futures prospects for the continent. China, which obtains 70% of its energy from coal, an abundant substance in that region, but a very environmentally unfriendly fossil fuel, has seen pollution reach extremes in some of its most populated cities including Beijing, the home of the 2008 Olympic Games. Currently, only 3% of total energy consumption comes from natural gas, but the government has set a target of upping this percentage to 5.3% over the next 2 years. Some of this supply will come directly from increasing production in China, while the rest may come from countries surrounding the energy rich Caspian Sea. A planned pipeline that will carry 30 billion cubic meters annually from that region to China may be operational as soon as 2010.

The future for the natural gas industry in China looks extremely bright. While the demand for increased energy from natural gas will certainly exist, the question of how that demand will be met still remain an issue, even if the planned pipeline from Central Asia happens without a hitch. Estimates for this year’s domestic natural gas production may show an additional gain of 30% growth, a number that - while large, is almost necessary to maintain Chinese natural gas prices where they currently are.