A natural gas project jointly developed by Chevron Corporation and PetroChina Company Ltd delivered its first gas on Monday-a significant move toward increasing domestic supplies of the cleaner-burning fuel.
The Luojiazhai gas field, also the first phase of the Chuandongbei project in the Sichuan Basin, has an annual production capacity of 3 billion cubic meters, according to a statement by the Chinese oil and gas company, which is the listed arm of State-owned China National Petroleum Corporation.
Chevron, the American multinational energy corporation, is the operator of the project and holds a 49 percent stake, with PetroChina holding the rest.
The companies have signed a 30-year deal to develop the tricky sour natural gas field, that contains a high level of hydrogen sulfide, meaning higher risk and standards in the technical processes being used.
The complexity of the project has meant the gas is coming on stream around eight years later than expected, coupled with what have been a series of disagreements on how to develop the fields.
Chinese energy majors are racing to explore natural gas resources as cuts in government-set prices and efforts to combat air pollution have boosted demand.
The world's fourth-largest consumer of gas saw demand rise 5.7 percent to 193.2 billion cu m, while gas production hit 135 billion cu m, a 5.6 percent rise, according to National Bureau of Statistics.
"We are not expecting to see the five-fold growth in gas use we have seen in the past decade, but the gap between supply and demand is still promoting more exploration of natural gas," said Wang Zimeng, a senior researcher at Sublime China Information Group, a Chinese commodities consultancy.
Despite the slowing economy, gas consumption in China, the world's largest energy consumer, is expected to hit 205 billion cu m this year, a growth rate of 5 to 6 percent, a report by SCIG said.
The Chinese government cut wholesale gas prices by 25 percent in November.
The slow-yet-growing demand in China's gas sector is the main driver behind billions of dollars of investment by foreign companies such as Chevron and British energy giant BP plc, Wang said.