The current amount of electricity generated by natural gas only contributes 2.1% of China’s total electrical needs, but that is expected to increase to 6.7% by 2020. Greater government emphasis on natural gas usage and the country’s rich natural gas reserves has convinced experts that the natural gas industry will enjoy a bright future. However, the road ahead is bumpy with obstacles and internal restrains.   According to the General Manager of China National Offshore Oil Corp’s (CNOOC) Gas & Power Limited Liu Liming, electricity generated by natural gas is still in disadvantageous position in terms of price compared with electricity generated by coal. By the end of 2005, electricity volume generated by coal is 70%, hydropower 23% and natural gas 2.1% respectively. The contribution of natural gas electricity is greater in developed countries such as 14% in the US, 31% in Britain and 64% in Japan.     “Although natural gas has many cost-saving and investment advantages, it still can’t challenge the domineering position of coal electricity,” added Liu, “First, its cost-saving advantages, low investment requirement and high efficiency cannot neutralize the price differences with coal electricity. Apart from the distribution of natural gas resources and markets are in more remote areas, China still lacks a market-oriented pricing mechanism to encourage natural gas supplier to lower the prices. Second, natural gas industry faces limitations imposed on natural gas electricity generator’s operations by natural gas supply. Large-scale projects generally face greater management and planning risks.”   “The establishment of a pricing mechanism and how to ensure stable natural gas supply in the long term remains the key to solve the bottlenecked development of the natural gas industry,” says an expert with the State Power Economic Research Center. “There is an urgent need to create a better pricing system, and construct more natural gas electricity infrastructure.”   China’s large collection of in natural gas reserves, which are mainly distributed in Inner Mongolia, Sichuan and Xinjiang, not only paves the way for the industry’s future development but also provides a convenient alternative to lift the country from its over-reliance on oil. According to the Economic Information & Agency, Xinjiang’s Tarim Oilfield is able to supply natural gas eastwards for the next 30 years. The Sulige Natural Gas Field in Inner Mongolia also displays a promising future. Seven natural gas reservoirs discovered in offshore areas contain natural gas reserves approaching 14 trillion cubic meters, and the natural gas reserves in the Nansha Basin are estimated at 8 to 10 trillion cubic meters.   CNOOC has also recently signed LNG delivery agreements with Shell, Total, and the French energy company Suez to expand into China’s LNG market.