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6 January 2022

China increases its coal and gas imports from Russia

China will build 150 GW of new coal plants by 2025 according to State Grid estimates, and its coal imports from Russia increased by 38% to 55 million tons in 2021 – out of 227 million tons exported by Russia overall, and this will increase further in 2022. The first three quarters of 2021 saw imports of Russian gas into China increase by 67.4%, with 12 billion cubic meters bought including 7 billion via pipeline.

The two countries are negotiating the details of a second Siberian pipeline to carry Russian gas into China – a trade which will strengthen beyond China’s carbon peak deadline.

At this outlet we cover China’s progress on renewables plenty, but the country still has late dates for carbon-peak and carbon-neutral, of 2030 and 2060, which are reflected in its ongoing energy strategy. That does not mean a total disaster of climate strategy, since these gas plants and modern coal plants are still a great improvement over the dirty old coal fleet, and as a proportion of China’s growing power mix, coal is to fall from 64% in 2020 to 56% and then 48% in 2025 and 2030.

China only runs its coal fleet at 50% capacity utilization and the need for new plants is more about local economic development and transmission limitations. China’s increased use of coal power is slowing ahead of the carbon peak target – growth is a lot less than you would expect from hearing that another 150 GW is to join its existing 1,080 GW fleet. We still expect the carbon-peak target to be met in 2028 or so, a couple of years ahead of schedule.

This week saw Indonesia ban coal exports to protect its own power supply – Indonesia was the source of 60% of China’s coal imports in 2021, with around 200 million tons bought in 2021. Such moves can only reaffirm China’s decision to strengthen links with Russia, since in addition to their geopolitical friendship, Russia always has a surplus of fossil fuels compared to its domestic demand and is reliable.

The first Siberian gas pipeline into China was commissioned in 2019 with a capacity of 38 billion cubic meters, and the proposed Power of Siberia 2 pipeline, originally called Altai before the new route was designed running all the way from the Uralic coastline, is to have capacity of 50 billion cubic meters, slightly less than Nordstream 2’s 55 billion. The decision to build Power of Siberia 2 is surely motivated by Europe’s energy transition policies, hostility to Russia, and delays to approving Nordstream 2: but since Power of Siberia 2 will only be commissioned in 2028, it is not relevant to Europe’s energy supply woes today.

Total Russian supply will still only be a quarter to a fifth of Chinese demand, with the rest being met from Uzbekistan and Myanmar, along with overseas LNG from Australia and others. China must surely by now have overtaken Japan as the world’s largest LNG importer.

China’s gas demand has previously been 50% industrial uses, but this is falling to a third while heating demand strengthens and the use of gas for power generation and gas peakers becomes more widespread. By some estimates China will have hundreds of GW of natural gas capacity by 2050.

The good side of that is that natural gas has partial compatibility with hydrogen, with SPIC claiming a “world first combined cycle and cogeneration demonstration project for hydrogen-mixed combustion in a natural gas commercial unit” at its Jingmen Green Power Plant in December. The project managed to run its gas turbine with a retrofitted 15% admixture of hydrogen, and in 2022 this will rise to a 30% mix.