Natural gas sector in high growth mode in China

China’s energy price reforms and a pressing need to move away from coal is making natural gas a growth winner.

The push towards more natural gas is being led by China's big state companies that are buying up local distributors and raising fresh capital. This massive attention has turned natural gas into the hottest prospect for energy investment in China. Natural gas also enjoys a lot of state policy support.

China is moving to double the share of gas in its overall energy supply to more than 8% by 2015, when consumption should reach 260 billion cubic meters (bcm), while coal will be cut to just over 60%.

By 2030, gas use will hit 500 bcm. A major share of that additional supply will go to new gas-fired power plants.

China's installed gas-fired capacity will more than quadruple to 220 gigawatts by 2020 from 40 gigawatts in 2011, creating a gas power equipment market worth US$4.2 billion a year from 2011-2020, nearly seven times the average size of the market in the prior five years, according to one estimate.

Shares of Hong Kong-listed natural gas distributors have risen as much as 37% over the past 12 months. The sector, with a market value of some US$32 billion, has valuations of more than 20 times historical earnings. Investors and analysts remain upbeat about the sector’s prospects.