Natural gas is in the midst of a transformative moment. The advent of shale gas, the growth of seaborne liquefied natural gas (LNG), and a new "green" image for the old hydrocarbon brought more uses, attention and yes, even controversy, to global gas markets. But the world's most influential player in all this is neither the world's largest gas producer, Russia, nor the world's second-largest consumer, the United States. It's China. Despite being much more reliant on oil and coal, Beijing has nevertheless managed to become the most agile and active force in the global gas market.
The reason has just as much to do with geopolitics as geology. As China seeks to secure energy sources for its growing economy, it has expanded production at home and made strides at ensuring its access to gas abroad. That quest has displaced a two-decades-long shadowboxing match between the West and Russia -- a "Great Game" China is now poised to win.
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China's recent reach into global gas opportunities is fueled by soaring domestic demand, as Chinese industry grows despite the global economic downturn. There are signs that Beijing's energy geopolitics ambitions cannot keep up: The onshore price of natural gas in China was just increased 25 percent. As a result, China is not only stepping up its own natural gas development, but also expanding its capacity to import LNG from places like Australia, Malaysia, Papua New Guinea, and Qatar.
Domestically, China's East-West pipeline brings gas from the energy-rich autonomous region of Xinjiang to the booming east coast. Xinjiang's proven reserves are about 700 billion cubic meters (about a tenth the size of U.S. reserves), but there might be a lot more. And PetroChina officials are exploring new shale gas and coal-bed methane opportunities all over the country. Eager to wean Beijing off of troublesome gas producers such as Iran, the Barack Obama administration recently signed a technology transfer agreement with the Chinese that would give Beijing the same revolutionary extraction capabilities that have created a shale gas bonanza in North America. One of Beijing's official goals is that China's coal-bed methane production should be 16 times higher in 2020 than it is today. Some analysts predict that China will reach 80 percent self-sufficiency in gas production by that time.
Further afield, Beijing has put into place infrastructure that would make Houston blush. Stretching 1,139 miles, the China-Central Asia pipeline connects Xinjiang with natural gas-rich Kazakhstan, Uzbekistan, and the biggest prize -- with potentially the world's fourth-largest energy reserves -- Turkmenistan. With the completion of this mammoth project, which was inaugurated in Turkmenistan by Chinese President Hu Jintao last winter, China became the most influential player in the struggle for resources in the energy-rich Caspian basin. Some analysts have even sounded the death knell for Russia's energy influence in Central Asia, Moscow's traditional back yard.
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