Natural Gas Development and Imminent Selection
                       Jing Shihong
1. Necessity of selecting natural gas
Since the 70's the energy industry in China  has  developed
fast with an average annual growth rate  of  8. 76%.   The
total amount of the primary energy in 1995 was  equivalent
to 1287 million tons of standard coal,   basically  enough
for the rapid development of the national  economy.   Coal
holds an absolutely leading position in the primary energy
production structure. During the  Eighth  Five- year  Plan
period, coal accounted for 75%, crude oil accounted for 18%,
natural gas accounted for 2% and water and  nuclear  power
accounted for 5%  of  the  primary  energy.   Such  energy
  structure  is  based  on  the  reliance  of  the   energy
consumption on the  domestic  energy  production.   It  is
therefore a self-reliant and closed-type energy structure.
The existing energy production and  consumption  structure
in China can, however,  hardly suit the need of  sustained
economic growth.
(1) The energy industry  can  not  suit  the  need  in  the
economic development.
China has abundant coal resources, but  most  of  them  are
distributed in the central and western  parts,   far  away
  from  southeast  coastal  areas  where  the  economy   is
developing fast. Coal transportation has produced a  great
pressure on railways and ports  and  has  become  a  major
  constraint  to  the  economic  development  in  southeast
coastal areas. Crude oil is another basic energy. However,
due to shortage of backup resources, the annual output  of
crude oil has been maintained at around 140  million  tons
in the 90's. China has turned from a self-reliant  country
to a net importer in these 30 years. The shortage of crude
oil is expected to reach 100 million tons  in  2010.   The
impact of oil price rise in the international  market  has
caused great difficulties in the oil industry in China.
(2) The environmental pollution is getting  more  and  more
serious.
According to statistics, the annual  amount  discharged  by
state-owned enterprises is more than 8  million  tons  for
industrial smoke and dust and more than  13  million  tons
for sulfur dioxide. The discharge amount of carbon dioxide
and nitrogen oxides is much higher  than  the  permissible
limit in many areas, especially in large  cities  such  as
Beijing and Shanghai. People's health is endangered.   The
mortality rate  of  malignant  tumors  such  as  pulmonary
cancer already accounts for  21. 8%  of  the  total.   The
expenditure spent in fighting against the diseases  caused
by environmental pollution reached 34 billion U.S. dollars
in 1995. Acid rain  is  expanding  fast.   The  acid  rain
frequency in some cities is more than 90%. In the 10  most
seriously-polluted large  cities  announced  in  the  Asia
-Pacific Forum of the World Energy Council held in  Beijing
in April 1997, 5 cities ( Beijing,   Shanghai,   Shenyang,
Xi'an and Chongqing) are in China.
(3) The improvement of people's living  standards  and  the
modern construction in urban areas call for  an  immediate
change of the existing energy structure.
The proportion of the coal consumption in Guangdong in  the
  energy  consumption  structure  has  dropped  to  56. 4%.
Regulations on restricting coal consumption are also being
formulated in Shanghai and  Beijing.   In  1996  southeast
coastal areas imported 8.8 million tons of heavy oil and 3
.5 million tons  of  liquefied  petroleum  gas,   and  also
constructed a large  group  of  oil- fired  thermal  power
stations and  related  projects.   The  oil  shortage  has
therefore become all the more prominent.
It is not hard to see that  as  a  high- efficiency,   high
-quality clean energy natural gas will hold a more and more
important position in the energy structure in China.
2. Large reserve but small output of natural gas
According to the second evaluation of oil and gas resources
made in 1993, China has 38 000 billion m3 of  natural  gas
resources. The recoverable reserve is  8  000  -   12  000
billion m3 and will finally reach 13 200 billion m3.   The
recoverable reserve of natural gas in China  accounts  for
around 8% of the world total.
The years from the Eighth Five-year  Plan  period  are  the
peak period for natural gas reserve growth. In  the  seven
years from 1991 to 1997, the proven reserve of gas in  gas
reservoir was increased by nearly 1 000 billion m3,   1. 4
times of the total reserve in the  previous  forty  years.
When 900 billion m3 of gas in  solution  was  added,   the
total proven recoverable reserve was         1 300 billion
m3 and the remaining recoverable reserve was  706  billion
m3 at the end of 1997. The reserve- production  ratio  has
increased from 18 : 1 during the Seventh  Five- year  Plan
period to 38 : 1, the reserve-production ratio of  gas  in
gas reservoir being 50 : 1.
According to experts, the natural gas reserve will continue
to have an annual increase of 100 billion  m3  during  the
Ninth Five-year Plan period, and  if  major  breakthroughs
are made the reserve increase  can  be  more  than  1  000
billion m3. The geological reserve will continue  to  have