2 Nov 2009 11:45

Demand fuels Guangdong's natural gas expansion

By Terry Wang

Beijing. November 2. INTERFAX-CHINA - Guangdong Province, one of the most developed regions in China, wants to increase its number of natural gas sources in an effort to meet growing demand, an official with the Guangdong Oil & Gas Association said at an industry conference on Oct. 29.

The Guangdong provincial government estimated that the province's annual natural gas demand will grow to about 43.1 billion cubic meters in 2015 and 60 billion cubic meters in 2020.

To meet this demand, the government aims to have nine sources of natural gas feeding the province, including five additional liquefied natural gas (LNG) terminals, two nationwide gas pipelines and an offshore gasfield, Kevin Zhuang, director of the association's gas department said at the 5th Annual Asia Gas Congress in Beijing.

Dapeng LNG terminal, the country's first, started operations in Guangdong in 2006 as part of a government effort to boost the natural gas consumption in one of the country's most energy deficient provinces, as well as in the rest of the country. Last year, the terminal handled 3.21 million tons of LNG, primarily from Australia.

The terminal is the province's primary source of natural gas, though China National Offshore Oil Corp. (CNOOC) has also put into operation several gasfields in the South China Sea, which supply gas to Zhuhai and Zhongshan cities. In addition, the second phase of West-East Gas Pipeline (WEP II) and the Guangdong branch of Sichuan-Shanghai Gas Pipeline are scheduled to start operations in 2010 and 2011, respectively, but Zhuang said that gas transmission will be delayed by at least a year.

Guangdong also plans to build five new LNG terminals, which are in various stages of development. The province had planned to build the second phase of the Dapeng terminal, but Zhuang noted that the project may be delayed due to the lack of land.

The province is now planning to add a fourth tank at the terminal to increase capacity. Zhuang said that expansion project has passed its environmental impact evaluation.

China National Petroleum Corp. (CNPC) also plans to build another LNG terminal in Shenzhen City to both supplement gas supplies from WEP II and supply gas to Hong Kong.

In Zhuhai City, CNOOC and Guangdong Yudean Group Co. Ltd. are collaborating to build an LNG terminal, but the project has been developing slowly because it has not secured an LNG supplier. CNOOC intends to build an LNG terminal in Jieyang City in eastern Guangdong Province, but the development of that project is even slower than the Zhuhai terminal.

Guangdong intends to build a fifth LNG terminal in the western part of the province, but the project remains in the initial planning stages.

With nine different sources, questions remain about how gas will be priced in the province, Zhuang said. To solve this problem, Guangdong hopes to build a single pipeline network whose operator will buy gas from these various sources and sell it to city gas companies at a uniform price. In 2007, Guangdong Yudean Group, CNOOC and China Petrochemical Corp. (Sinopec Group) established a company to operate the network.

Currently, the only major gas pipelines in the province are those that connect the Depeng LNG terminal with the cities of Shenzhen, Dongguan, Guangzhou and Foshan, as well as a few of the terminal's largest clients like CNOOC's Huizhou Refinery, Zhuang said.

According to the provincial government's plan, a pipeline network linking the Pearl River Delta region with the northern part of the province will be completed by 2010. From 2011 to 2015, Guangdong will build a pipeline network in the eastern and western parts of the province and then link them with that of the Pearl River Delta. Between 2015 and 2020, the network is expected to cover the whole province with 2,900 kilometers of trunk pipeline.

Development of the project, however, has been slow because Guangdong's city gas companies do not want the province's gas pipeline network to be monopolized by a government-controlled company that would limit their bargaining power, Zhuang said.

CNPC has made some headway by reaching agreements with several cities to build pipelines and supply gas, yet progress remains slow.