Backed by policies pushing cleaner fuel sources and increasing supply availability, natural gas demand in China is projected to increase 94%, or 148 million tonnes of oil equivalent (MMtoe), in the next six years, Barclays said in a report released this month.

This could come amid slowing demand for coal, predicted to increase only 13%—or 241 MMtoe—for the same time period, while oil demand in the world’s most populous country could grow by 20% (1.9 MMbbl/d) through 2020.

Although energy demand overall is expected to surge in China, the forecast is that the growth won’t be as fast as previously predicted, Barclays said in the report on China’s commodity demand.

“Patterns of energy demand are likely to be transformed by three key trends: cleaner energy, greater electrification and a reduction in energy intensity of the economy as a whole. Energy demand in China is undergoing a rapid slowdown and at just 3% pa [per annum] average growth to 2020 will be only half that of the previous five years,” according to Barclays, later adding energy demand could reach 3,453 MMtoe. “Coal will be the big loser, its demand growth falling by more than half to an average of just 2% pa as it loses share in electricity generation to nuclear, gas and renewables.”

In the report, Barclays used its so-called Flight Path Analysis to assess the likely growth for various commodities and how the change could impact international markets. The framework for determining the flight path took into account factors such as the commodity’s stage of development, where it is moving over the next five years, its current and future share of global demand and how fast that is changing.

Gas on the runaway: With growing supply availability and policy support, Barclays said natural gas is “apparently winning over cheap but dirty coal, which is already affected by the slowdown of large industrial uses in steel and cement production.” However, future gas demand in China could take a turn if the government backs off of its clean energy push. Natural gas demand is forecast to increase 94% within six years, according to the report.

Coal at cruising altitude: Barclays has lowered its demand growth projection for coal. The report showed that coal demand is expected to grow by 13%; whereas, in the previous six years, it was projected to grow 32%.Tax and environmental charges have negatively impacted coal’s cost edge.

Oil leveling out: Oil demand is also down from the previous forecast. “Oil demand growth is set to continue slowing as growth rates for diesel, petrochemicals and residual fuel oil contract. The effect of this on crude oil demand is partially offset by faster growth in refined products like gasoline and jet fuel,” Barclays said. By 2020, the forecast shows oil demand could rise about 20% to nearly 11.9 MMbbl/d. Demand was estimated to grow 34% between 2008 and 2014. Slower growth means that China’s share of global oil demand is nearing its peak.

“Energy and environmental policies have been in place since the 1990s to encourage energy conservation, coal diversification and environmental friendly development. The effort has led to the reduction of energy intensity by 19% in 2005-2010, and an additional 16% reduction is expected by 2015,” the report continued. “The policy has also been a significant factor behind the increase in natural gas and non-fossil fuels. Nevertheless, economic growth has assumed more importance and environmental pollution has continued to worsen. After years of rapid economic growth at the expense of the environment, we think China has in fact reached an inflection point.”

The preference of consumers, who Barclays said have called for better air quality since daily publication of air quality readings started in 2011, will drive policies. China could also see its share of global gas demand double to 10% in the next five years.

Renewables taking off: As coal loses market share in electricity generation, renewables and nuclear, in addition to gas, will gain. Combined, the report said Chinese energy consumption of these energy sources will double to 15% as coal falls from 65% to 60%.

“By 2020, China could account for almost 40% of total global energy generation from renewables,” the report said. “The next five years will bring big changes in the main factors that have been driving China’s commodity demand growth for most of this century so far, as the transition to a less investment driven, more consumer led economy, less competitive in global manufacturing, but also less polluting, gathers pace.”

Contact the author, Velda Addison, at vaddison@hartenergy.com.