WITH factories and power plants across China burning half the world’s coal, the government’s latest targets for using more natural gas to ease the country’s worsening air pollution seemed too ambitious.

Though gas remains a small and expensive component in China’s fuel mix, demand is rising faster than expected for domestic and imported supplies. In April, consumption was 22 per cent higher than the same month in 2016, and the total for the first four months of the year is up more than 12pc, data from the National Development and Reform Commission show.

The results are encouraging analysts to upgrade their demand forecasts and may signal the government is on track to reach its goal of getting as much as 10pc of its energy from gas by 2020. It’s also bolstering the outlook for hundreds of billions of dollars in possible investments by companies as far away as Russia, Australia and the US to build gas pipelines and export infrastructure to feed the growing Chinese market.

“China’s targets are looking more and more achievable,” said Laban Yu, head of Asia oil and gas equity research at Jefferies Group LLC in Hong Kong. “It has nothing to do with China’s economy, or natural gas and coal prices. It’s policy driven, and it’s about whether the government is serious about doing what it says it will do.”

Unlike the US, where cheap and ample supplies of gas led to a surge in use by power plants and factories that now exceeds coal, China’s domestic output costs more to produce and the country relies on long-distance imports, including liquefied natural gas carried by tankers. Government-set prices are among the highest in the world, leaving no incentive to switch unless pushed by regulation.

President Xi Jinping’s government is leaning on gas as one tool for easing the air pollution that’s choking cities from Beijing to Shanghai. Coal burning is the biggest culprit in the smog that’s a frequent urban blur and poses risks to the health of the world’s biggest population.—Bloomberg-The Washington Post Service

Published in Dawn, May 28th, 2017