PetroChina Bets on Deep Coalbed Gas as LNG Prices Squeeze Asian Buyers

PetroChina's Daji gas field in the Ordos Basin produced 1.69 billion cubic meters in 2024, a 79% jump from the prior year, as the company accelerates development of deep coalbed methane deposits that were commercially marginal only a few years ago. Cumulative output at Daji has reached 3 bcm since operations began. The timing is favorable for Beijing. Asian LNG spot prices have roughly doubled since late February, with JKM last quoted at $18.96/MMBtu on May 19. The Iran conflict has removed an estimated 12.8 million tonnes of annual LNG capacity from Qatar's Ras Laffan complex, pushing Asian buyers into direct competition with European importers scrambling for cargoes. Domestic gas that bypasses that market altogether has tangible strategic value. Across China's deep coalbed sector, production hit 2.5 bcm in the three years through 2024, with PetroChina's coalbed methane division alone contributing nearly 2 bcm last year. The National Energy Administration listed the ramp-up among its top-10 national oil and gas achievements — an unusual designation for a nascent production stream. The resource base is the real story. China's deep coalbed gas reserves in the Ordos, Sichuan, and Junggar basins are estimated at more than 40 trillion cubic meters. Of the 320 bcm in cumulative reserves added over the past three years, 77% came from formations below 1,500 meters, where pressures average 22-35 MPa and methane concentrations run at 96.92%. Unlike shallower coalbed methane, these deeper reservoirs contain meaningful free gas alongside adsorbed gas, improving flow rates and economics. China targets 17 bcm of total coalbed gas production in 2025. The longer-term projection is more significant: the government sees deep coalbed gas delivering 40-50 bcm annually by 2035, which would cover roughly 15-20% of current national consumption of around 230 bcm. Getting there from here is a substantial leap. April data showed Chinese thermal power generation up 3.6% year-on-year even as domestic coal output fell 1% month-on-month, pointing to inventory drawdowns under demand pressure. Wind and nuclear output also declined. The shortfall was manageable in spring; summer air conditioning load will be a harder test for domestic supply chains. PetroChina has flagged 40 priority deep and ultra-deep exploration areas holding an estimated 39.6 trillion cubic meters of original gas in place, and has set a 2035 target of 50 trillion cubic meters in confirmed deep coalbed reserves. Those are long-horizon commitments. Near-term output remains small against China's consumption base. The number that matters for traders is simpler: if PetroChina sustains the 79% annual growth rate it achieved at Daji, cumulative deep coalbed output could approach 10-12 bcm within three years. That would be large enough to measurably slow LNG import growth — and to register in Asian spot price forecasts heading into the 2026-27 heating season. Whether Beijing can hold that growth rate across fields with more complex geology than Daji is the question the next two years will answer.