1. Introduction
With China’s commitments to tackling global climate issues (e.g., carbon peak in 2030 and carbon neutral in 2060), clean energy will mainly replace coal and oil in the future. As the main clean, low-carbon energy source, natural gas could become the key alternative energy source to mitigate China’s economic-environmental problems [
1].
Due to insufficient local natural gas production, China’s external gas dependence will rise to as high as approximately 65% in 2030 according to estimates by British Petroleum Company (BP) and has brought great challenges to China’s natural gas supply security [
2]. Gas storage is an excellent tool for providing supply flexibility and for addressing the problem of possible gas supply cuts [
3,
4]. However, China’s total underground gas storage (UGS) capacity was only 11.2 billion cubic meters in 2018, accounting for less than 5% of the annual consumption, which is much lower than the world average of approximately 15%. The lack of storage also usually creates gas supply shortage problems with respect to seasonal peak shaving demands [
5]. With the increased natural gas consumption in China, the demand for storage and imports will further increase. Consequently, to address these demands, China needs to strengthen its construction of supporting infrastructure, such as underground storage facilities (e.g., depleted gas or oil reservoirs, underground salt caverns or other geological structures), cross-border pipelines and liquified natural gas (LNG) receiving stations [
6]. The very high gas storage and import demands in the future may affect the regional Asian market and even global market trends. Therefore, forecasting storage and import demands is of increasing significance, which is conducive to formulating plans to sign appropriate gas import contracts and conduct reasonable planning for the supporting infrastructure [
7,
8].
Regarding the assessments of gas storage demand and imports, a number of studies have been conducted using different methods. Confort and Mothe [
9] assessed Brazil’s required storage capacity by investigating the relationships among storage capacities and the various characteristics of the gas sector via linear regression analysis. They compared the empirical analysis results from 38 countries and summed up the experience of countries with mature natural gas storage systems to predict Brazil’s natural gas storage demand. However, this did not consider the characteristics of Brazil’s own natural gas system, which may result in low effectiveness of the assessment. Hoffler and Kubler [
10] estimated the additional gas requirements for underground storage facilities in northwestern Europe until 2030 by extrapolations based on gas production and consumption forecasts. The extrapolation method used is based on the main natural gas macro data, which is simple, intuitive and easy to replicate to other markets, but at the same time, it may not have good market simulation accuracy due to insufficient variables. de Joode and Ozdemir [
11] also investigated future gas storage requirements as a source for seasonal flexibility provisioning in northwestern Europe using a game-theory equilibrium model. The model included micro-market entities, such as gas suppliers and consumers. It established a competition-game mechanism between entities, and infrastructure constraints are also taken into consideration. Other models have also been applied to energy and resource problems, such as Monte Carlo simulations [
12,
13,
14], genetic fuzzy systems [
15], artificial neural networks [
16,
17], econometric regression models [
18], MARKAL models [
19,
20], and nonlinear hybrid models [
21]. However, the above studies are mostly based on deductions of the historical data of individual variables, which are suitable for short-term forecasting but ignore the feedback mechanisms among the multiple variables of systems, which are helpful for medium- and long-term forecasting.
To study the gas storage demand and import demand, all of the consumption and supply components and influencing factors should be included in the system. For instance, gas consumption consists of residential gas and industrial gas consumption, which are related to population and economic growth, while gas production depends on the proved reserves and recovery efficiency [
22]. Therefore, we need to comprehensively consider these factors as a unified system. The system dynamics (SD) approach is well-suited for analyzing systematic problems that contain multiple variables and complicated causal relationships among variables. The SD approach is consistent with traditional economic modelling of dynamic phenomena but employs different terminology and conventions [
23]. The most important feature of this method is the feedback structure of the system, which is usually done using causal loop diagrams. A positive feedback drives the system to seek to return to equilibrium after a disturbance occurred in the system. By contrast, a negative feedback may result in a situation where the initial disturbance could be amplified. The model is composed mainly of two kinds of variables: stocks and flows. The operation of the model requires some initial values of variables as input, and the evolution of the system is mainly driven by the correlation between variables and then outputs the results. Various scenarios can be simulated in SD models to observe their different behaviors, which is helpful for policy decision-making [
23,
24,
25,
26]. Moreover, SD model pays close attention to the long-term trends in system behaviors, which is in line with our research goals in this study [
25,
26]. Compared with the other methods mentioned above, the SD model is less dependent on historical data but has higher requirements for the abstraction of the economic relationship of the system. The selection of variables needs to fully consider the market mechanism and the characteristics of the local energy system.
To quantify the natural gas growth trends for China, Li et al. [
27] used a system dynamics model to forecast China’s gas consumption, in which the authors believed that China’s gas demand will continue to increase to 340.7 bcm in 2030. The gas consumption forecast by Mu et al. [
28] will reach 450 bcm in 2035. These studies have not considered the environmental constraints that have gradually increased in recent years and the impact of carbon emission trading system on energy substitution [
29,
30]. We thus believe that their forecasts of China’s gas consumption are significantly underestimated. In addition, the above research on gas supply and demand systems ignores the storage part, while storage is the key link to reconcile supply and demand. Moreover, they rarely discuss the feasibility of the prediction scheme in combination with the actual supporting infrastructure conditions.
To fill these gaps, this paper explores the gas storage demands and corresponding import strategies in China. The supporting infrastructure planning and storage management regulations are also discussed to provide support for policy making. The remainder of the article is organized as follows: in the next section, a system dynamics model was developed, and we present the model structure, general description and validity analysis.
Section 3 presents the results from alternative scenarios.
Section 4 discusses natural gas-related infrastructure planning issues based on forecasted storage and import demand. Finally, we provide the major conclusions in the last section.
3. Analysis of Alternative Scenarios
In the base case, the energy intensity growth rate was set to −2%, and the carbon price was 50 RMB. In the next 40 years, a higher energy intensity decline rate of −3% was considered with respect to the future accelerated industrial upgrading of China. To reduce carbon emissions, gas consumption might rise sharply along with its substitution for coal and may also decline due to the growth in renewable energy use. Carbon prices play a key role in the adjustment of the energy structure. Then, by referring to the development of European carbon markets and the high carbon prices, such as Sweden’s carbon price of up to US
$125 (about 800 CNY) per ton, we assumed three future carbon price scenarios, namely, 100 RMB/ton, 500 RMB/ton and 1000 RMB/ton, to characterize the low, medium and high levels of environmental constraints, respectively. The corresponding combination scenarios with settings are shown in
Table 5.
Figure 9 shows that an accelerated decline in carbon intensity will help achieve the peak of carbon emissions in 2030, and the high carbon prices will help to achieve the energy transition, increase the proportion of clean energy, reduce carbon emissions per unit of GDP and help to achieve carbon neutrality by 2060. On the whole, EI_C100, EI_C500 and EI_C1000 are more feasible for the carbon neutral route and will be used as the key analysis scenarios.
Figure 10 and
Figure 11 show the dynamics of natural gas consumption, storage and import demand for the EI_C100, EI_C500 and EI_C1000 cases. In all of three cases, the growth in gas consumption in the next 20 years will be very rapid. In 2030, natural gas consumption will be between 500–690 bcm; storage demand will reach 88–130 bcm; import demand will be 290–480 bcm; and at that time, the import dependence will rise to 58–70% (see
Figure 11). In case EI_C1000, natural gas consumption will nearly double and reach a peak at 850 bcm in approximately 2040, and higher renewable energy use will compress the natural gas growth space after 2040. The storage demand will reach a peak in approximately 2045, and then import pressures will drop, but import dependence will still remain at high levels, i.e., above 60% before 2060.
4. Discussion
The storage strategy requires large-scale underground gas storage facilities, and the import demands also need to be satisfied by pipelines and LNG receiving facilities. Infrastructure has the characteristics of large investments, long construction periods and high operation and maintenance costs. Therefore, it is very important to plan the infrastructure construction in combination with the storage strategy to avoid the occurrence of insufficient facility capacity or asset stranding [
40].
China has managed 27 natural gas storage reservoirs with approximately 11.2 bcm of working gas volume by 2018, which accounted for less than 5% of total gas consumption. The gas storage projects in China are planned to expand the working gas volume to approximately 61 bcm by 2030, which will account for approximately 9% of the forecasted consumption [
35].
Table 6 shows that the storage demand will be 89.1–130.3 bcm by 2030, which means that China’s planned storage capacity is insufficient at present, with a gap at 28.1–69.3 bcm. More gas storage facilities are needed to reach the safe reserve target. The investments in the unit working gas volumes of the depleted oil and gas reservoirs in China are 3.5–4.0 RMB [
6], which will require an additional planning investment of 98.35–277.2 billion yuan to expand the storage capacity.
The current and future gas import facilities should also be considered to test the feasibility of the import strategies.
Table 7 presents China’s pipeline and LNG receiving facility operations and planning project data. According to the project data, we can calculate the annual expected maximum gas-import capacity of China, which is listed in
Table 8. China’s maximum gas import capacity may reach 490.8 bcm in 2030, which is sufficient to meet the import demands for all cases shown in
Table 6. In case EI_C1000, the storage and import demands will decline after 2040, which will make it possible for the facilities constructed in the early stage to exhibit serious asset stranding.
In summary, infrastructure planning must be combined with the energy development expectations. This is also the significance of our predictions of storage and import demands. In view of the changing supply and demand scenarios, the planning period for facilities should not be too long and should be dynamically adjusted. On the one hand, infrastructure construction in the early stage must meet the growing market demand; on the other hand, it is necessary to consider reuse of facilities when natural gas consumption declines. To avoid asset stranding of gas facilities, for instance, the excess LNG receiving stations and cross-border pipelines can be opened to serve overseas customers as distribution centers for transshipment to other natural gas importing countries in Asia. This may help China to establish an Asian gas trading center to make full use of the natural gas infrastructure, which would be a systematic project.
In China, as a supporting infrastructure for long-distance pipeline networks, control of the construction, operation and management of UGS and LNG receiving stations is controlled by giant state-owned enterprises. Other private enterprises and capital have difficulty competing with them. This single investment strategy has affected the construction of gas storage facilities, which has caused the market-oriented adjustments to lag somewhat, which is one of the key reasons for the current shortage in gas storage capacity. Therefore, in terms of systems and regulations, full use of market forces should be made, national and commercial reserves should be combined, the profit margins of reserves and imports should be released and enterprises should be encouraged to participate.
5. Conclusions
Gas storage is one of the most important sources for providing supply flexibility for the gas market, which plays a key role in peak shaving demand and national energy security. This study discussed the planning and construction of gas storage and import demands for China’s gas market in the future. We developed a system dynamic model to simulate the behavior of the natural gas market in China, in which related variables such as gas consumption, national production, and import and storage demand were included. Several alternative cases were defined to explore a variety of storage planning scenarios, such as changes in the energy consumption structure and carbon emission constraints.
The promise of carbon neutrality provides opportunities for natural gas growth, but at the same time, the development of non-fossil energy also brings uncertainty to natural gas growth. The simulation results show that the storage demand in 2030 will be between 89.1 and 130.3 bcm with a 24% reserve target, but the current planned energy storage is only 61 bcm, which shows that the storage capacity is not sufficient, while the imported capacity may be idle under high environmental constraint for achieving carbon neutrality after 2040. We believe that a complete storage system would facilitate the development of natural gas markets and help guide China’s natural gas market reforms. Based on our study and discussion, we provided some suggestions for China’s natural gas storage planning and supply guarantee.
(1) It is recommended to adopt a two-line strategy. One strategy is to make reasonable plans and control the development speed of domestic natural gas resources, protect high-quality gas field resources, and build large-scale underground gas storage facilities at the same time. Another way is to actively participate in the investment and development of overseas oil and gas resources to obtain overseas resources for import.
(2) To strengthen the construction of the storage and import infrastructure, scientific planning and demonstration are prerequisites. According to the long-term and short-term demands and development trends of a comprehensive domestic energy plan, underground gas storage, LNG receiving stations and pipeline network should be planned reasonably, which should not only avoid the case of insufficient facilities but also should avoid asset stranding.
(3) Adopt market-oriented methods to promote the development of the storage industry and remove the price controls on storage fees. Reserve gas fields and underground gas storage can adopt mixed ownership investment operations and attract diversified investments. It is important to ensure that the upstream and downstream industries are more closely linked through storage construction, which would form a tight and flexible operational system.
(4) Gradually establish and complete supporting laws and regulations to protect investor rights and interests. Encourage diversified capital sources to participate in the construction of strategic reserve gas fields and gas storage.