China unveils subsidy incentives to boost unconventional gas production

China has rolled out a revised subsidy policy to accelerate the development of unconventional gas, including coalbed methane, shale gas, and tight gas, as part of broader efforts to expand clean energy production and reduce emissions, a notice published on the website of the Ministry of Finance on March 13 showed.

The updated "Clean Energy Development Special Fund Management Measures", effective from 2025 to 2029, introduces a performance-based subsidy mechanism under the principles of "more production, higher subsidy" and "increased winter output, additional subsidy", according to the notice.

Under the new rules, producers will receive subsidies proportional to year-on-year growth in unconventional gas production, with larger rewards for greater growth.

Additionally, extra premiums will be allocated for incremental production during the winter heating season. Funds will be disbursed through advance payments followed by final settlements.

The new measures will take effect immediately, repealing the interim measures previously issued by the Ministry of Finance.

The policy aims to incentivize higher output of unconventional gas, which is crucial for sustaining momentum in the sector, diversifying China's energy mix, and reducing reliance on coal, industrial sources said.

State media CCTV reported on March 13 that an official overseeing the initiative noted the new measures increased support for coalbed methane development, highlighting China's vast reserves and the fuel's dual role in enhancing coal mine safety while lowering greenhouse gas emissions.

The subsidies will also back key clean energy technologies, large-scale projects, and public infrastructure, with strict rules ensuring earmarked use of funds. Competitive allocation mechanisms will determine funding distribution.

As the world's largest coal consumer, China has prioritized scaling up gas output to meet its 2030 carbon peak goals.

China's unconventional natural gas production exceeded 96 Bcm in 2023, accounting for 43% of total natural gas production and becoming an important growth pillar for increasing natural gas reserves and production, according to the National Energy Administration. The annual output of tight gas, shale gas and coalbed methane exceeded 60 Bcm, 25 Bcm and 11 Bcm, respectively, in 2023, the NEA's data showed.

The policy underscores Beijing's commitment to balance energy security with its climate agenda amid rising demand and international decarbonization pressure, analysts said.