"Big Three Oil Companies" Think Tank: The Natural Gas Market Will Continue to Grow, and Oil Consumption Will Reach Its Peak

Reporter Pan Juntian

At the Bloomberg New Energy Finance Beijing Summit held on March 13, experts from the China Petroleum & Chemical Industry Federation’s Economic and Technological Research Institute, China Petroleum Economic and Technological Research Institute, and China National Offshore Oil Corporation’s Energy Economics Research Institute all agreed that China’s natural gas market will maintain high growth in the future, while domestic oil consumption will peak.

Cao Jianjun, Chief Expert at the China Petroleum & Chemical Industry Federation’s Economic and Technological Research Institute, stated that over the next 10 years, only aviation kerosene among domestic refined oil products is expected to grow, but its base is small and insufficient to offset declines in gasoline and diesel. Meanwhile, domestic natural gas consumption will continue to grow for at least the next decade.

The “2025 Domestic and International Oil & Gas Industry Development Report” released by the China Petroleum Economic and Technological Research Institute shows that in 2025, domestic refined oil consumption will decrease by about 3% year-on-year, with gasoline and diesel consumption down 2.4% and 4.4%, respectively, while aviation kerosene consumption will increase by 2.1% year-on-year; oil used as chemical raw materials will grow by 8.8% year-on-year.

Dai Jiaquan, Chief Economist at the China Petroleum & Chemical Industry Federation’s Economic and Technological Research Institute, said that the domestic natural gas market has shifted from policy-driven to market-driven. By 2025, domestic natural gas consumption will still mainly be for industrial use and urban gas, with growth rates of only about 1.5%. The increase in consumption that year will mainly come from LNG heavy trucks replacing diesel vehicles.

Regarding the industry’s generally optimistic outlook for natural gas power generation, Dai Jiaquan believes that its uncertainty remains high.

He gave an example: in 2025, the average import price of LNG in China will be about 2.58 yuan per standard cubic meter, and pipeline-imported natural gas will be about 1.80 yuan per standard cubic meter, while the acceptable upper limit for raw material prices for peak-shaving power generation is about 2.6 yuan per standard cubic meter.

Dai Jiaquan also pointed out that another factor affecting natural gas power generation is geographic variation. For example, in Beijing, winter daily natural gas demand exceeds 100 million cubic meters, coinciding with peak electricity usage. If the scale of natural gas power generation expands, upstream oil and gas companies will face significant supply assurance pressures.

Guo Shengwei, Deputy Director of the China National Offshore Oil Corporation Energy Economics Research Institute, said that future profits of natural gas power plants may vary due to different locations and management practices.

Cao Jianjun predicted that over the next five years, there will be clear development potential for natural gas in the industrial sector, especially as a substitute for coal, but this must be balanced against cost competitiveness with coal. While natural gas power generation has potential, it is constrained by multiple factors. Residential (urban gas) and vehicle (LNG heavy trucks) sectors will become important sources of incremental natural gas consumption.

Domestic oil consumption is expected to peak during the 14th Five-Year Plan period. On March 7, the State Council Information Office held a briefing to interpret the draft outline of the 14th Five-Year Plan, where Yuan Da, Secretary-General of the National Development and Reform Commission, stated that during the 14th Five-Year period, efforts will be intensified to develop non-fossil energy, accelerate the transition to new electricity consumption driven by clean energy, and push coal and oil consumption to peak.

Dai Jiaquan said that, due to the need for crude oil capacity reserves, when domestic refined oil consumption is relatively low in the future, exports of refined oil could be appropriately expanded to enhance industry resilience.

He also predicted that by 2030, domestic natural gas production could exceed 300 billion cubic meters annually, with crude oil output remaining above 200 million tons.

Regarding the surge in international oil prices, Dai Jiaquan stated that although there are current issues with global crude oil transportation, China has sufficient crude oil reserves to withstand shocks.

From 2019 to 2025, the country’s proven oil reserves increased by over 10 billion tons, with annual crude oil production rising from 189 million tons in 2019 to 216 million tons in 2025.

Dai Jiaquan noted that, based on calculations, if international oil prices remain at $80 per barrel long-term and relevant domestic investments are in place, China could add about 10 million tons of crude oil capacity annually from its unused reserves.

As of March 13, Brent crude was approximately $102 per barrel, and Oman crude was about $120 per barrel. Brent mainly reflects global oil supply and demand, while Oman crude more specifically indicates oil supply and demand in Asia.