"The third potential consequence is a widening of demand gap between peak and off-peak seasons, which implies more storage capacity needs to be build to meet peak demand," he told the Pacific Energy Summit at the end of last month. According to CNPC, the mainland's gas consumption growth has slowed to 2.3 per cent year on year in April, compared with 6.9 per cent in the year's first four months.

It is also much weaker than the 9.8 per cent last year, and an average of 16 per cent over the past 15 years, Shan noted.

CNPC in January had forecast this year's gas demand on the mainland to rise 9.3 per cent.

Shan attributed the weaker than expected demand to the economic slowdown, which has hit gas demand from glass and steel producers particularly hard.

Also to blame are a warmer than normal winter and the high price of gas relative to alternative energy after a sharp fall in crude oil prices since the middle of last year and an extended slump in coal prices since late 2011.

Mainland petroleum fuel prices have become more closely linked to international prices determined by market forces. Reform for gas pricing has only been partially implemented, with the bulk of the sales volume still state-stipulated.

Beijing two years ago announced a framework to link domestic natural gas prices to those of alternative fuel that had undergone liberalisation, so that state-set prices will gradually become more market-oriented amid surging imports. But only a small portion of the nation's gas sales volume has been liberalised on pricing, although Beijing has reiterated its resolve to do so.

When international oil and gas prices soared in previous years, Beijing kept gas prices lower than overseas levels to protect domestic consumers from the full brunt of higher prices.

This meant state-backed PetroChina had absorbed tens of billions of annual losses in importing expensive gas and selling it at lower prices. Now that international gas prices have slumped following the decline in crude oil prices, Beijing has yet to cut domestic gas prices enough to match overseas prices since there is a time lag for PetroChina's high import prices to come down. It also gives the energy giant time to offset previous losses on imports.

Shan expected Beijing to further cut gas prices "soon" to avoid prolonged oversupply and to encourage more use of the cleaner-burning fuel to tackle air pollution. Prices were last adjusted on April 1.

Industry regulator the National Development and Reform Commission last November unveiled a target for gas consumption to reach 360 billion cubic metres in 2020, almost double last year's 185 bcm that made the mainland the world's third largest gas consumer after the United States and Russia.

The target implied natural gas would make up more than 10 per cent of the nation's energy consumption in 2020, up from 6 per cent last year.

"Without an improvement in gas's competitiveness versus alternative fuel, gas' share in the nation's energy consumption mix may only reach 8.5 per cent in 2020," Shan said, adding demand could reach only 300 bcm in 2020 under CNPC's "business as usual scenario" assumptions.

"How to balance demand and supply, domestic production and imports, will be a test of the government's determination and wisdom to realise the nation's goal to increase the contribution of lower carbon emission fuel in the energy mix," he said.

Industry consultancy Wood Mackenzie's principal gas consultant Gavin Thompson estimated that the mainland faces an oversupply of 18 billion cubic metres (bcm) of gas between this year and 2017, as lower than expected demand growth meant some of the 66 bcm of gas imports contracted will not be needed in the domestic market.

"China's national oil firms are now pursuing numerous channels to reduce [import] volume," he said.

"This includes efforts to renegotiate ramp-up schedules and pricing terms, and reselling volumes into the Pacific market."