China's natural gas demand is on track to grow by a robust 8% in 2023 compared to the previous year, reaching an estimated 396.4 billion cubic meters (bcm), according to an analyst from CNOOC's research division. This growth rate is higher than forecasts made by other analysts and can be attributed to several key factors.

Imports of liquefied natural gas (LNG) are expected to rise significantly, reaching 70.79 million metric tons in 2023, marking a 10.9% increase from the previous year. Meanwhile, imports of pipeline gas are projected to reach 69.5 bcm, showing a substantial 10.7% growth compared to 2022.

This forecast from CNOOC stands out due to the rare decline in Chinese gas demand experienced in 2022, when it slipped by 1%. This decline was primarily attributed to stringent COVID-19 controls. It also resulted in China losing its top LNG importer ranking to Japan.

Several factors are driving this year's surge in demand. Firstly, China's economic recovery is a significant driver. As economic activity rebounds, industrial gas demand is expected to recover in the second half of the year.

Secondly, global LNG prices have been cooling down. The normalization of global gas prices is also playing a role in stimulating demand.

Notably, this growth exceeds the predictions of various analysts, who estimated gas demand growth for the year to fall between 5.7% and 7.4%.

According to CNOOC, China's total gas demand is expected to peak in 2040 at around 700 bcm, aligning with a prior forecast by state major Sinopec. This growth will be partially met by an increase in domestic gas production, which is anticipated to rise by 4.6% in 2023, reaching 227.8 bcm.

To meet the rising domestic demand, both piped gas and LNG imports are expected to increase. China's LNG receiving capacity, currently estimated at 139.3 million tons annually by the end of 2023, is set to expand significantly to 181.8 million tons by 2025, according to CNOOC's projections.

To prepare for "extreme situations," CNOOC has proposed that China build emergency LNG reserves of at least 15 bcm by 2025 and a 25 bcm stockpile by 2030. At the 15 bcm level, this reserve would represent roughly 12% of China's total LNG imports by 2025 or 3.4% of the nation's gas demand.

Moreover, CNOOC highlighted that China's dependence on foreign gas imports is expected to grow in the coming years. Imports of both LNG and piped gas are projected to account for 46% of domestic demand in 2025 and 49% of domestic demand by 2035. The majority of the 11% growth in piped gas imports is expected to come from Russia's East Siberian fields via the Power of Siberia pipeline. Imports of Russian piped gas surged by 54% in 2022, as Russia continued to deliver through the Power of Siberia pipeline, which is set to reach its full capacity of 38 bcm annually by 2027.