October 15, 2025

Despite the growth of renewable energy and a continued heavy reliance on coal-fired power generation, Incorrys believes China’s need for natural gas must increase significantly to meet growing energy demand going forward. Currently, China utilizes a mix domestic production, pipeline gas, and liquefied natural gas (LNG) to meet their natural gas requirements. Incorrys has examined how their natural gas supply mix might evolve over the next decade, and the potential role Canadian LNG might play. China consumed just over 41 Bcf/d of natural gas in 2024 with about 60% of this demand being met by domestic production and the remaining 40% covered by imports. Roughly half of the imported gas arrives via pipeline — mainly from Russia and Turkmenistan — and the other half comes in the form of LNG. Figure 1 shows China’s expected 2025 natural gas supply mix required to meet demand with about 60% (25 Bcf/d) met by domestic production, 20% (over 8 Bcf/d) via pipeline gas, and 20% (over 8 Bcf/d) from LNG imports from numerous countries.

Figure 1: China’s Natural Gas Supply Portfolio in 2025

China’s natural gas demand has grown steadily since 2017 at an average annual rate of about 8%. The industrial sector accounts for the largest share at 50% (20.5 Bcf/d), followed by city gas distribution at 34% (14 Bcf/d), with power generation making up the remaining 16% (6.5 Bcf/d). Over the last few years Chinese domestic production has grown steadily at a rate of 6-8% per year and is expected to reach over 25 Bcf/d in 2025. Incorrys estimates that domestic production will continue to grow, however the growth rate will gradually slow due to the limits of technological improvements and maturity of some fields. Our forecast is for total domestic production to reach 37.5 Bcf/d in 2035. The share of natural gas in China’s power generation sector remains low, while coal still accounts for more than 55%. Although the development of renewable energy in the coming decades may slow the growth of fossil fuel consumption and help reduce the use of coal, it is unlikely to impact the increase in natural gas demand. A large-scale transition to electric vehicles in China will raise electricity demand; China is also actively converting freight transport to natural gas, partly to avoid increasing its dependence on imported oil. Figure 2 shows China’s power generation mix by fuel type through 2024, showing that coal and growing renewable generation, and nuclear, make up the majority of the power generation mix while natural gas remains relatively small.

Figure 2: China’s Power Generation

CNPC, China’s largest oil and gas company, forecasts natural gas demand in China will rise to 58 – 65 Bcf/d by 2040. The lower end forecast is based on a carbon-neutral scenario. The same study projects that China’s domestic gas production will peak at 27 – 30 Bcf/d between 2035 and 2040. This means that by the second half of the 2030s, China’s total natural gas imports will need to double from the current 17 Bcf/d up to 28 – 38 Bcf/d. Figure 3 shows China’s total natural gas demand forecast to 2035 according to a base scenario, which Incorrys considers as most realistic (Ailin, Gang, et.al, 2023).

Figure 3: China’s Natural Gas Demand Forecast

China’s pipeline imports arrive via several operational routes as shown in Figure 4, with additional capacity expected later in the decade. The Central Asia–China pipelines (Lines A, B, C), supplied by Turkmenistan, Uzbekistan, and Kazakhstan, have been operational since 2009 and deliver 5.3 Bcf/d, remaining steady through 2030. The Sino–Myanmar pipeline, in service since 2013, contributes another 1.2 Bcf/d, deliveries at this rate are expected to continue. From Russia, the Power of Siberia-1, launched in 2019, supplies 3.7 Bcf/d through 2029, rising to 4.3 Bcf/d by 2030. Additional Russian capacity is expected with the Far East Pipeline, scheduled for completion in 2027, starting at 1.0 Bcf/d and reaching 1.2 Bcf/d by 2030. Negotiations continue for the Power of Siberia-2, planned for the mid-2030s, which would add another 4.8 Bcf/d once commissioned. Gazprom CEO Alexei Miller announced recently that Moscow and Beijing had reached a binding agreement regarding construction. Pricing and other terms are yet to be agreed, as China seeks to reduce reliance on US LNG, and Russia looks for China to replace European gas volumes. Finally, the Central Asia–China Line D from Turkmenistan, is targeted for 2030, adding another 2.9 Bcf/d. Figure 4 shows expected Chinese natural gas import pipeline capacity 2030.

Figure 4: Chinese Import Pipeline capacity 2030

Figure 5 shows forecasted Chinese LNG demand, calculated as the difference between total supply required to meet demand less domestic production and pipeline imports. The High scenario is associated with delays in construction of new large pipelines (Line D and Power of Siberia 2) and yields a peak of about 10 Bcf/d of LNG imports by 2030. The low case scenario results if new large pipelines are operational by 2030.

Figure 5: Chinese LNG Demand

At present, about one-third of China’s LNG imports come from Qatar, another third from Australia, with Russia and Malaysia each accounting for around 10%, with the remaining 15% supplied by other exporters. LNG production in Qatar is expected to remain at current levels or increase in the foreseeable future. Russian LNG production will remain flat. Forecasts for Australia and Malaysia point to declining production and exports after 2030s due to rising domestic demand and depletion of gas resources. As a result, Beijing will need to seek new sources of gas to replace supplies from these countries. There are hopes for large new LNG projects in Mozambique and Tanzania, but they will not be sufficient to fully cover the emerging gap.

Beijing and Washington are interested in continuing trade but seek to minimize mutual dependence and avoid giving the other side potential levers of pressure. China has already used critical minerals as a strong lever in a recent trade dispute. Beijing also understands that if the Chinese economy becomes dependent on certain categories of imports from the United States, such vulnerabilities could be exploited.

Thus, China is unlikely to increase its purchases of US LNG imports. In 2021, the United States was among the largest LNG exporters to China however, they had fallen to 4th place by 2024 with a share of just 5% as cargoes were diverted to Europe following the Russian invasion of Ukraine. The last US LNG cargo bound for China left port in mid-November 2024, after which Beijing stopped buying LNG from the United States. Deliveries from Canada would provide a hedge against US supply.

The LNG Canada joint venture is comprised of Shell (40%), Petronas (25%), PetroChina (15%), Mitsubishi Corporation (15%), and Korea Gas Corporation (5%). Each participant provides their own natural gas supply and individually markets their respective share of the liquefied natural gas. PetroChina’s share of the expanded LNG Project would amount to an offtake approximating 0.5 Bcf/d, with cargoes from the other partners, most notably Shell, also available to China. Currently only Phase 1 has been constructed. The Phase 2 expansion would double the facility’s capacity to 28 million tons per annum. The fifth LNG Canada cargo in July 2025 was taken by PetroChina. Canada could supply a significant share of LNG to China, depending on the uncertainties in pipeline gas capacity and Chinese natural gas demand growth projections.

References:
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Reynolds, Sam. “Understanding the competitive landscape for China’s LNG market.”, Institute for Energy Economics and Financial Analysis, April 2025, https://ieefa.org/resources/understanding-competitive-landscape-chinas-lng-market

“Statistical Review of World Energy 2025”, Energy Institute, https://www.energyinst.org/statistical-review/home . Accessed 17 September, 2025

Ailin, Jia. Gang, Cheng. Weiyan, Chen. Yilong, LI. “Forecast of natural gas supply and demand in China under the background of “Dual Carbon Targets”.”, ScienceDirect, April 2023, https://www.sciencedirect.com/science/article/pii/S1876380423604045

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Vakulenko, Sergey. “The Bargaining Triad: What Stands in the Way of Russia and China Reaching an Agreement on Power of Siberia-2.”, Carnegie Politika, September 2025, https://storage.googleapis.com/crng/russia-china-gas-deals.html