Dynamic analysis of natural gas substitution for crude oil: Scenario simulation and quantitative evaluation

Abstract

This research examines the consequences of a potential complete disruption of crude oil imports on China's energy sector, focusing on the role of natural gas as a substitute for oil. We utilize a system dynamics model to simulate the interactions and flow of materials and information among various energy sources—namely, natural gas, oil, coal, and others—in a complementary energy system. The model encompasses several demand sectors, including residential and industrial heating, transportation, chemical production, and power generation. We perform scenario analyses to investigate how different parameters such as the magnitude of the interruption, the transmission of risks, the length of the interruption, initial stockpiles, and demand reduction, influence the operation of the energy system. The main conclusions drawn from our analysis are: (1) While natural gas substitution can partially alleviate the impacts of an oil import interruption, its effectiveness is limited by resource availability, technological constraints, and infrastructure requirements; (2) Merely increasing natural gas reserves is insufficient to compensate for a halt in oil imports; it is also critical to enhance the dispatching capability of natural gas and to expand the deployment of natural gas facilities in the industrial and transportation sectors; (3) In the absence of relying on natural gas substitution, China would have to reduce domestic fuel demand by more than 50% to maintain the stability of its overall energy supply. These findings offer valuable perspectives for addressing energy security concerns and facilitating the transition to low-carbon energy in China and other countries that are heavily dependent on oil imports.