The firm expects to increase production 20 percent this year to 34.2 billion cubic meters, according to Shi Yufeng, an engineer at PetroChina's natural gas & pipeline unit.

PetroChina produced 28.5 billion cubic meters of gas last year, or more than 70 percent of China's production of over 40 billion cubic meters.

While growth of natural gas production growth is rising in China, demand in the booming economy is starting to outpace supply, Shi said.

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Gas use is growing rapidly in homes and in the industrial sector, with chemical and fertilizer plants encouraged to do so by the government.

Even so, prices have not risen in tandem with demand, and PetroChina is lobbying the government to adopt a more market-oriented pricing mechanism, especially in more economically developed cities, where residential use of gas is rising and more supply sources are becoming available.

CNOOC and China Petroleum & Chemical Corp, or Sinopec, are expected to supply gas from the Chunxiao field in the East China Sea to Ningbo, Zhejiang province, this year. CNOOC is also proposing to build an LNG terminal in Zhejiang.

PetroChina will build pipelines connecting Daqing, in Helongjiang province, to surrounding cities when large reserves found there recently have been developed to a reasonable scale, Shi said. The biggest oil field is in Daqing.

The west-to-east pipeline supplies a large number of fertilizer plants but the government regulates gas pricing to such plants to maintain stability in the agricultural sector. Production costs vary with the source, making the price of imported LNG higher than gas from the pipeline.