Taiwan has very limited domestic natural gas reserves. According to Oil and Gas Journal (OGJ), Taiwan had 220 billion cubic feet (Bcf) of proven natural gas reserves as of January 2008, down from 297 Bcf in January 2007. As in the petroleum sector, state-owned CPC dominates Taiwan's natural gas activities.

In 2007, Taiwan consumed an estimated 399 Bcf of natural gas while only producing 14 Bcf. Natural gas consumption in Taiwan has consistently trended upwards, rising from 352 Bcf in 2004 to 368 Bcf in 2005 and 375 Bcf in 2006. CPC anticipates an increase in natural gas demand and rising liquefied natural gas (LNG) imports due to the construction of additional natural gas-fired power plants and environmental concerns.

Although natural gas was primarily consumed in the residential and industrial sectors in the mid-1980s, today the majority of natural gas goes towards power generation. Nearly 80 percent of natural gas consumed in Taiwan in 2006 was in the electric power sector.

Taiwan has nine onshore natural gas producing fields on the western side of the island, as well as three offshore platforms in the CBK 1-3 natural gas fields. Despite limited production and discovery of natural gas reserves to date, CPC continues to conduct exploration activities, particularly in offshore areas. During 2005, CPC reported that it discovered 5.4 Bcf of additional proven natural gas reserves in the southeastern section of its Guantian natural gas field. In July 2005, Taiwan’s legislature approved a CPC plan to explore and develop the offshore F Structure near Kaohsiung, which the company estimates holds 211 Bcf of natural gas. CPC is currently looking into delaying development at the F Structure, however, due to heavy costs associated with high crude oil prices and expensive offshore development equipment. CPC is also engaged in cross-strait cooperation with China’s CNOOC in the Tainan basin in the Taiwan Strait, which CPC estimates to hold 41.7 trillion cubic feet (Tcf) of natural gas reserves. Initial drilling in the Tainan basin has not led to any commercial gas production as of yet (see the South China Sea report for more information).

Taiwan is the fifth-largest importer of liquefied natural gas (LNG) in the world and the third largest in Asia. Without significant domestic natural gas reserves, Taiwan must resort to LNG imports to meet energy demand on the island. Taiwan had net imports of 372 Bcf of LNG in 2006, nearly 13 percent more than in 2005. Indonesia and Malaysia are Taiwan’s largest suppliers of LNG, having delivered 151 Bcf and 154 Bcf of LNG respectively in 2006. Taiwan also receives shipments of LNG from Trinidad and Tobago, Algeria, Egypt, Nigeria, Oman, Qatar, Australia, and small spot cargoes from Equatorial Guinea. Taiwan receives LNG through spot, short-term, and long-term cargoes. The Taiwanese government hopes to increase imports of LNG to help meet the country’s increasing energy needs, reduce carbon dioxide emission levels, and increase gas-fired power generation. CPC expects LNG demand to rise by 25 percent by 2010.

Concerns have grown over Taiwan’s LNG supply security, particularly after Indonesia's Pertamina canceled ten LNG cargoes to Taiwan in late 2004. In addition, in light of concerns about falling output, Indonesia does not intend to renew a LNG contract with Taiwan that is currently set to expire in 2009. Another major contract between the two countries is set to expire in 2017. CPC is currently pursuing alternative long-term LNG contracts in order to diversify and ensure an adequate and reliable supply. As a result, CPC signed a 25-year LNG purchase agreement for 3 million tons per year (146 Bcf) with Ras Laffan Liquefied Natural Gas Company Ltd II (RasGas II) of Qatar to begin in July 2008. In August 2006, Japan’s NYK-Mitsui joint venture won a 25-year contract to ship the LNG from Qatar to Taiwan. In 2008, CPC and Australia’s Woodside Petroleum Ltd signed a deal for 2 to 3 million tons per year (97 to 146 Bcf/y) of LNG supplied from the Browse LNG project off Western Australia for a term of 15-20 years. The deal represents one of the largest trade deals ever for Australia and is scheduled to begin between 2013 and 2015.

CPC owns and operates Taiwan's only LNG receiving terminal at the Yungan township of Kaohsiung, which has a capacity of 7.4 million tons per year (360 Bcf/y of natural gas). The terminal was completed in 1990, thereby beginning Taiwan’s importation of LNG. The terminal underwent several expansion projects to reach its current capacity and also includes a long-distance undersea pipeline connecting the terminal to the town of Tongsiao to the north. To meet rising demand, CPC is also constructing a new LNG import terminal in Taichung, which is expected to come online in August 2008. The start-up date was postponed from January 2008 due to delays in the construction of a pipeline connecting the terminal directly with the state-owned utility Taipower’s Tatan Power Station. The project will add 3 million tons per year (146 Bcf/y) of LNG import capacity. CPC signed a 25-year contract in 2003 to supply the Tatan plant with 1.68 million tons per year (82 Bcf) of LNG via the Taichung terminal beginning in 2008. In addition, reports indicate that Taipower is seeking government approval to import LNG independently of CPC, either by building its own import terminal or leasing facilities from CPC. Taipower currently buys its natural gas from CPC.

To facilitate supply and expand the use of natural gas in Taiwan, CPC has constructed a transmission and distribution network along the country’s west coast, which includes a 1,100-mile trunkline and 36 regional distribution stations.