Sichuan gas find 'biggest discovery' ever for China

A new natural gas discovery in southeast Sichuan province - the single biggest ever - could ease domestic shortages in as little as a year and give China a stronger hand in energy negotiations with Russia, according to some experts.

China National Petroleum Corp, the country's biggest oil and gas producer, announced on Monday that it discovered natural gas reserves of 440 billion cubic meters, of which 308 billion cu m are technically recoverable.

The new reserves are in the Moxi block in Anyue county, Sichuan. It's the single biggest gas discovery in China, according to the company.

"The new find will become an important supply in the future amid increasing domestic natural gas consumption," said Wang Xiaokun, an energy analyst at consultancy Sublime China Information.

"In addition, pricing is always a tough problem for China-Russia natural gas negotiations. The new find may give China a bigger say in the future."

She said that CNPC can achieve commercial production of the new source within one year.

According to CNPC, a testing well at the site has a daily output of 1.1 million cu m, and the production facilities being built will help raise annual output to as much as 10 billion cu m.

That's equivalent to the annual natural gas imports from Myanmar. It's enough to supply Beijing for a year, Wang said.

China used 169 billion cu m of natural gas last year, according to the National Development and Reform Commission.

The central government is trying to boost the use of natural gas to reduce coal consumption and improve urban air quality. That drive has lifted natural gas imports in recent years.

Natural gas imports rose 25 percent last year to 53 billion cu m, 32 percent of total consumption, according to the CNPC Economics and Technology Research Institute.

The institute forecast that imports will rise 18.9 percent this year to 63 billion cu m.

Duan Zhaofang, a natural gas expert at the institute, estimated that China will consume 186 billion cu m of natural gas this year, up 11 percent, which means that almost 34 percent of natural gas use will depend on foreign supplies.

Not all experts are taking the same view of the significance of the new find. Wang Ruiqi, an analyst with energy information consultancy ICIS C1 Energy, said gas supply shortages will persist for several years in China.

"CNPC's new discovery will help to ease the situation", she said. "However, the impact will not be huge, and it won't affect the trend of increasing dependency on imported natural gas."

The consultancy estimated that up to half of China's natural gas consumption will come from imports by 2018.

China is devoting more effort to exploring more energy resources and raising domestic output.

PetroChina Co Ltd, the listed arm of CNPC, produced 58 billion cu m of natural gas during the first three quarters in 2013, according to the company.

According to the Ministry of Land and Resources, China's crude oil and natural gas output in 2030 will be more than double the figure for 2013.

China's western region, which includes such reserves as the Tarim Basin in the Xinjiang Uygur autonomous region in the northwest and the Sichuan Basin in the southwest, has huge potential as a source of oil and natural gas, Peng Qiming, director of the ministry's geological exploration department, told a news conference early this year.

"Those areas will become major contributors to the country's energy output, producing 60 percent of the total in 2030 compared with 45 percent in 2012," he said.

The new find in Sichuan gave credence to his comment.

CNPC said on Tuesday that its Changqing oil and gas field in western China had yielded new proven oil reserves of 300 million tons, and total natural gas reserves in the field reached more than 600 billion cu m in 2013.

"The Qinghai oil and gas field, which is owned by CNPC, will see efforts made in the exploration sector this year. The goal is to add 200 million tons of oil equivalent" to reserves, said CNPC.