China is boosting domestic natural gas production, and it is doing it fast. A major LNG consumer—and importer—the country has been key in LNG demand forecasts. Now, these forecasts will need to be revised.

Less than ten years ago, China was struggling to get its domestic gas production off the ground, especially in shale formations. China’s shale geology is different from the U.S. basins, and energy companies were finding it difficult to get commercial production going. Now, China’s state oil and gas majors are pumping more gas than ever and announcing new discoveries in the shale patch.

In November last year, China produced 22.1 billion cu m, which was a 7.1% increase on the year, Kpler reported this month citing official production data. The increase was driven by “faster-than-expected shale gas ramp-ups in the Sichuan Basin.” Based on that data, the energy analytics firm expects China’s total for 2025 to reach 263 billion cu m, rising to 278.5 billion cu m this year, again thanks to growing shale gas production in the Sichuan and Shanxi basins.

As with oil, rising domestic production would inevitably affect imports, even as China leans more heavily on natural gas for emission-reduction purposes. Last year, for instance, China booked higher domestic gas production and a rather substantial decline in LNG imports. In fact, imports of liquefied gas last year fell to the lowest in six years after a string of 12 monthly declines in a row. Imports only rebounded at the end of the year but not enough to reverse the decline. Kpler has predicted that Chinese demand for liquefied natural gas is going to decline this year as well, with shale gas production removing some 600,000 tons of LNG demand, reducing the total to 73.9 million tons.

Related: Washington’s Venezuelan Oil Push Falters on Funding Questions

Now, 600,000 tons is not a whole lot in the context of a market where the United States alone exported over 100 million tons last year. But it does serve as yet another evidence of a trend in China to reduce dependence on energy imports, which has implications for global energy commodity markets that have gotten used to relying on China as the ultimate driver of demand.

The projected decline in China’s demand for gas—and by extension LNG—may interfere with new LNG capacity addition plans and prices, shrinking producers’ profits. It is these plans for a wave of new LNG supply, set to come online by the end of the decade, mostly from the top exporters, the United States and Qatar, that have prompted many analysts to expect an oversupplied LNG market by 2030 that would weigh on prices.

Then there is competition on the LNG market itself. China is no longer importing U.S. liquefied gas amid the two countries’ tariff spat that President Donald Trump launched as soon as he was sworn in. But Russia is exporting record volumes to its neighbor. For now, these record volumes are not exactly massive. However, they come from two sanctioned LNG facilities, suggesting that, like oil and love, gas always finds a way as long as the price is right.

Growing Russian exports of LNG to China could also be a factor in LNG market forecasts, especially once the European Union’s total ban on Russian energy imports, meaning gas, comes into effect next year. Currently, the European Union is the largest buyer of Russian LNG; once the ban comes into effect, these flows will be redirected, and the likeliest new destinations will be China and India.

Meanwhile, pipeline gas flows into China are also about to tick higher this year, dampening demand for liquefied natural gas further. Imports via the Power of Siberia pipeline from Russia alone could move higher by 8 billion cu m than in 2025, according to Kpler, driving an overall 8% increase in pipeline imports to a total 80.7 billion cu m. Pipeline gas imports from Central Asian countries, meanwhile, are seen declining by 4 billion cu m in 2026 on the back of stronger domestic demand that will make those countries keep more gas at home.

China will continue ramping up its domestic natural gas production. Reducing dependence on energy imports is a priority for Beijing. Yet this import reduction will be gradual and it will sooner or later reach its limits. Until then, it is price that will drive import decisions—and the impact that these decisions could potentially have on the global LNG market.

To be fair, however, that impact is unlikely to be as major as the impact of oil demand trends in China. The reason is that there are plenty of other countries with solid demand for liquefied gas—especially if prices move lower and stay there, whether thanks to new capacity that is boosting supply or thanks to lower Chinese demand driven by rising domestic production.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com