OREANDA-NEWS. June 10, 2011. China could overtake Russia as the second largest natural gas market by 2020 on the back of demand fueled by a rise in per capita GDP, analysts from Bernstein Research said in a report.

"In the [country's] latest twelfth five-year plan, which was introduced a couple of months ago, the target is to increase gas consumption from about 6% of the energy mix in China to roughly about 8%," the report said.

This would translate into increasing natural gas demand from about 11 Bcf/day to about 25 Bcf/day, equivalent to the combined demand in the UK and France, the report added.

The Bernstein report attributed China's growing consumption of natural gas to four factors -- industrialization, urbanization, the environment and transportation -- which were in turn triggered by the country's growing urbanization.

"China is about 50% urbanized," the analysts said. "Every year there are 30 million, 40 million new people that are added to cities in China, and a lot of these cities are now being based on natural gas infrastructure."

The report pointed out that in Central China, for example, many of the buses, taxis and trucks run on natural gas, which is significantly cheaper than oil. "This is playing out not just in China, but across Southeast Asia and countries like India," the analysts said.

The growth in China's natural gas demand would depend on its infrastructure, including the second West-East pipeline scheduled to be completed later this year.

Besides natural gas imports, the construction of five to seven new LNG regasification terminals along China's coast would increase LNG imports by 40 million mt/year over the next six years, the report said.

EMERGING ASIAN MARKETS, JAPAN TO BOOST LNG DEMAND
China, India, Southeast Asia, coupled with Japan's requirements after the March 11 earthquake and the resulting nuclear crisis would boost LNG demand, the report said.

LNG demand doubled to 200 million mt/year from 100 million mt/year over the past 10 years, and could double again to 400 million mt/year over the next decade, it added.

"What is driving that is the growth that we are seeing in emerging markets, in China, India, Southeast Asia, and of course, we are also seeing increased demand from countries like Japan, where we're seeing roughly about 12 [million]-15 million mt/year of additional LNG demand as a result of Fukushima," the analysts said.