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Chinese demand fuels growth in natural gas industry

The natural gas industry grew last year at the fastest rate since the immediate aftermath of the financial crisis, led by a surge in Chinese demand, which also helped to propel growth in energy consumption globally, according to energy major BP.

A switch to cleaner fuels boosted gas demand, but efficiency gains slowed as industrial activity picked up, coal consumption rose for the first time in four years and carbon emissions increased after three years of little to no growth.

The data show how entrenched fossil fuels are in the energy system, even as governments make drastic policy shifts towards greener energies, raising questions about how the world meets emissions targets under the Paris climate accord.

“It’s a case of two steps forward, one step back,” said Spencer Dale, chief economist at BP.

Gas consumption rose by 3 per cent — or 96bn cubic metres — which is the fastest since 2010. Production expanded by 4 per cent or 131 bcm, BP said in its annual statistical review published on Wednesday, in what was a “bumper year”.

Chinese consumption accounted for a third of the global increase, as the industrial and residential sectors swtiched from coal to gas for power generation as part of a government drive to tackle air pollution.

With a deadline of a five-year environmental plan expiring, Beijing announced a new series of measures late in 2017 for major cities that helped bolster growth in gas consumption.

“The resulting increase in gas demand was greatly compounded by the switch into gas reaching a peak just as winter heating demand was ramping up,” said Mr Dale.

Still, despite the substantial switching to gas, China’s demand for coal grew for the first time after three consecutive years of declines. This, alongside growing demand in India, propelled global coal consumption.

“After several years of free-fall, the coal market experienced a mini-revival last year,” Mr Dale said.

Global coal consumption increased by 25m tonnes of oil equivalent, or 1 per cent — the first growth since 2013. This follows last year’s report when BP said the world has made a “decisive” shift away from coal.

The uptick in coal consumption alongside a pick-up in global economic growth and industrial activity drove a marked increase in carbon emissions in 2017 for the first time in three years.

“The backward’s step in last year’s data is most stark in carbon emissions from energy consumption,” Mr Dale said.

The new data reveal that despite the “extraordinary growth” in renewables for power generation — 17 per cent last year alone, led by wind and solar — coal has retained the same share of its power sector fuel mix over the past 20 years.

Coal’s share was 38 per cent in 1998, the same in 2017. Non-fossil fuel’s share was slightly lower over the time period as the rising share of renewables failed to offset the drop in nuclear.

Mr Dale said this was worrying because the power sector is the single most important source of carbon emissions from energy consumption, accounting for a third of those emissions in 2017.

“To have any chance of getting on a path consistent with meeting the Paris climate goals there will need to be a significant improvement in the power sector,” Mr Dale said. “This is one area we haven’t even taken one step forward.

Source: FT.com

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