SunSirs: China’s Energy Structure Continues to Optimize and Adjust

According to the Economic Daily, the China Petroleum Enterprises Association and other organizations recently jointly published the *Blue Book on the Petroleum Industry*, the *Blue Book on the Low-Carbon Economy*, the *Blue Book on Refined Oil Products and New Energy*, and the *Blue Book on the Natural Gas Industry*. The series of blue books indicates that by 2025, the global energy landscape will undergo profound adjustments, international oil and gas prices will experience volatility, and the transition towards a green and low-carbon economy will accelerate. Against this backdrop, China’s crude oil production will remain stable and increase, whilst the refined oil market will undergo structural optimization; natural gas production will continue to grow, the production, supply, storage and sales system will be continuously improved, and the capacity for diversified supply security will steadily strengthen.

Experts indicate that as traditional energy sources improve in quality and efficiency and low-carbon technologies are progressively implemented, China’s energy structure is being optimized at an accelerated pace.

Significant divergence in refined oil consumption

The ‘Blue Book on Refined Oil and New Energy’ reveals that in 2025, China’s refined oil market will exhibit a trend of declining both supply and demand. Analysis suggests that the primary reason is a weakening of demand in the refined oil market as the penetration rate of new and alternative energy sources continues to rise.

On the supply side, China’s refining capacity reached 939 million tons per annum in 2025, representing a year-on-year increase of 0.64%. New capacity was concentrated in large-scale projects such as Zhenhai Refining & Chemical and Yulong Petrochemical, whilst outdated capacity was phased out in an orderly manner. Refined oil production stood at 413.157 million tons, a year-on-year decrease of 1.43%. There was a marked divergence across product categories, with kerosene production rising by 5.9% year-on-year, whilst petrol and diesel production fell by 3.4% and 1.8% respectively.

On the demand side, China’s refined oil consumption reached 398.1971 million tons in 2025, a year-on-year decrease of 3.62%. The structure of the refined oil market has diverged significantly, forming a new pattern characterized by “declining petrol and diesel, rising kerosene”. Specifically, impacted by the shift towards new energy sources, petrol consumption stood at 155 million tonnes, down 4.3% year-on-year, whilst diesel consumption was 203 million tons, down 4.0%; kerosene consumption reached 40.21 million tons, up 1.3% year-on-year, achieving positive growth driven by the recovery of the civil aviation sector.

This year, influenced by the situation in the Middle East, global crude oil supply and prices have fluctuated sharply, with these fluctuations further impacting the refining, transportation and end-user refined oil markets, thereby exacerbating instability in the international refined oil market. Under the combined influence of geopolitical risks, the low-carbon transition and adjustments to the end-user energy consumption structure, the growth rate of global refined oil consumption will continue to slow, whilst the substitution effect of electric vehicles and alternative fuels on traditional petrol and diesel will continue to strengthen.

Currently, China’s refined oil products consumption market is undergoing structural transformation. In terms of total consumption, China’s refined oil products consumption has peaked ahead of schedule and entered a phase of declining growth. “The Chinese refined oil products market faces the dual challenge of ensuring supply and stabilizing prices whilst demand remains under pressure,” predicted Sun Renjin, a professor at China University of Petroleum. He forecast that by 2026, the supply of traditional oil products will remain generally stable, whilst consumption of petrol and diesel will continue to decline due to the substitution by new energy sources and economic restructuring; consumption of jet fuel, however, will maintain steady growth.

Natural Gas Industry Sees Growth in Both Production and Sales

As a clean, low-carbon, safe and efficient fossil fuel, natural gas is a key pillar in ensuring China’s energy security and achieving the strategic goals of the “dual carbon” initiative.

The Blue Book on the Natural Gas Industry indicates that in 2025, China’s natural gas exploration and development yielded fruitful results. Natural gas production reached 261.889 billion cubic meters, a year-on-year increase of 6.26 per cent, marking the ninth consecutive year that the target of increasing production by over 10 billion cubic meters has been met; The consumption structure continued to optimize, with industrial fuel substitution, the expansion of urban gas supply, gas usage in advanced manufacturing, and peak-shaving in power generation serving as the core drivers of demand growth. National apparent natural gas consumption reached 426.55 billion cubic meters, with growth stabilizing; natural gas imports stood at 127.9236 million tons, a year-on-year decrease of 2.86 per cent, whilst the external dependency ratio fell to 41.32 per cent, remaining within a reasonable range. Pipeline natural gas imports increased by 7.98 per cent year-on-year, with import sources and channels becoming further diversified.

“Amid a complex and ever-changing international environment and the deepening process of the global energy transition, China’s natural gas industry has demonstrated remarkable resilience and vitality, and is steadily moving towards higher quality, greater efficiency and greater sustainability,” explained Zheng Xiaoqiang, Dean of the School of Economics and Management at Southwest Petroleum University. He noted that the industry has adhered to a strategy of prioritizing domestic production whilst diversifying imports, thereby achieving a steady increase in supply capacity, stable operation of the consumer market and continuous optimization of the import structure.

During the 14th Five-Year Plan period, China’s natural gas industry has shown continuous growth momentum across the entire value chain, from upstream exploration and development, through midstream storage, collection and transportation, to downstream consumption in the end-user market. Data indicates that natural gas reserves have increased from 626.66 billion cubic meters to approximately 697 billion cubic meters. By the end of the 14th Five-Year Plan period, 42 natural gas storage facilities had been constructed, with a total storage capacity exceeding 100 billion cubic meters and peak-shaving capacity exceeding 27 billion cubic meters; 39 liquefied natural gas (LNG) receiving terminals had been put into operation, with an annual unloading capacity exceeding 200 million tons and a receiving capacity exceeding 160 million tons; The total length of natural gas pipelines will reach 128,000 kilometers, of which the total length of import pipelines will be 110,000 kilometers with a transmission volume of approximately 185 billion cubic meters, whilst the total length of domestic pipelines will be approximately 18,000 kilometers with a transmission volume of approximately 76 billion cubic meters.

Zheng Xiaoqiang stated that during the 15th Five-Year Plan period, natural gas, as a key transitional carrier in the new energy system, bears the important mission of ensuring national energy security. The natural gas industry will continue to demonstrate a development trajectory characterized by steady growth in production and consumption, continuous optimization of market structure, and increasingly improved infrastructure, providing a solid foundation for building a major energy power.

Opportunities for Low-Carbon Industries

2025 marks the 10th anniversary of the Paris Agreement, a time when the global climate crisis faces profound and complex changes. “As the green and low-carbon transition accelerates both domestically and internationally, China’s low-carbon policy framework is placing greater emphasis on institutionalization, systematization and feasibility.” ” Kong Chaoyang, Associate Professor at the School of International Business, University of International Business and Economics, explained that in the final year of the 14th Five-Year Plan, China has intensively introduced policies such as dual-control of carbon emissions and the expansion of the national carbon market to build a systematic low-carbon governance framework; it has continued to refine the “1+N” policy system to promote the coordinated development of low-carbon and digital transformation in sectors including industry, transport and construction; and it has transformed low-carbon finance into an institutional arrangement by unifying green finance standards, clarifying the carbon market roadmap and strengthening constraints on green electricity consumption.

Kong Chaoyang believes that amidst the global surge in carbon reduction and carbon sequestration, the low-carbon industry has ushered in unprecedented development opportunities and will become a new growth driver for the future.

The ‘Blue Book on Low-Carbon Economy’ reveals that by 2025, numerous industries in China will have made significant progress in low-carbon transition and sustainable development. In the thermal power sector, notable advancements have been achieved in carbon emission control and energy-saving retrofits; in particular, the commissioning of carbon capture and storage (CCS) projects has driven the industry’s green development; In the transport sector, breakthroughs have been achieved in new energy vehicles, railway electrification, green shipping and sustainable aviation fuels, establishing a multi-tiered policy framework and innovative technology system; in the green building sector, low-carbon development has accelerated, with expanded scale and updated evaluation standards; in the industrial energy conservation and emission reduction sector, overall industrial energy consumption has remained stable whilst energy efficiency has continued to improve, with policies driving ultra-low emission and energy-saving retrofits in sectors such as steel, non-ferrous metals, building materials and chemicals to greater depth and effectiveness; In the resource recovery sector, the total volume of recycled resources exceeded 400 million tons, with significant growth in the recovery of categories such as end-of-life vehicles and waste electrical and electronic equipment; notable technological achievements were made in the high-value utilization of retired power batteries and photovoltaic modules.

The development of alternative energy is a key measure underpinning the high-quality development of low-carbon industries. “In 2025, China’s alternative energy sector demonstrated a trend of expanding scale and accelerating penetration,” said Sun Renjin, noting that the share of non-fossil energy consumption reached 21.7 per cent.

The Blue Book on Refined Oil and New Energy indicates that in 2025, China’s installed photovoltaic (PV) power generation capacity exceeded 1 billion kilowatts, reaching 1.2 billion kilowatts, a year-on-year increase of 35 per cent, marking PV as one of the primary power sources with the highest share and the largest growth in the power system; the country’s cumulative installed wind power capacity made a historic breakthrough of 600 million kilowatts, reaching approximately 640 million kilowatts, a year-on-year increase of 22.9 per cent, continuing to maintain a rapid growth trend; The national installed capacity for biomass power generation reached 47.43 million kilowatts, maintaining the top global position for seven consecutive years, with electricity generation amounting to approximately 224.7 billion kilowatt-hours, making China the world’s largest producer of biomass power; green hydrogen, ammonia and methanol fuels are moving towards large-scale application.

Sun Renjin predicts that by 2026, alternative energy sources will exhibit a development trend characterized by diversified penetration and accelerated large-scale application. The installed capacity of photovoltaic and wind power will continue to expand, further increasing the share of renewable energy in power generation. The production capacity and output of green hydrogen, green ammonia and green methanol will grow rapidly, entering a phase of large-scale application in sectors such as shipping, chemicals and power generation. Diverse pathways—including CNG commercial vehicles, LNG heavy-duty trucks, biomass energy and hydrogen energy—will develop in synergy, forming a transport energy substitution landscape characterized by ‘electricity as the mainstay, with multiple energy sources complementing one another’, thereby providing strong support for the implementation of the dual-control system for carbon emissions.

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