China
's
burgeoning gas demand has been a key driver for a swathe of projects to supply
the clean-burning fuel -- but the speed at which it will shift away from coal
and oil could still catch markets by surprise.
From
Guangzhou
's small eateries to porcelain mills on the city's outskirts, from its
bus fleet to its shiny high-rise apartments in
Beijing
,
gas is taking over from dirtier alternatives as the fuel of choice to cook,
heat and transport.
Aluminum smelters in
Inner Mongolia
are shifting to
gas from crude, and power generators in east
China
have dumped oil for gas.
After a tripling in consumption in the
past decade, gas is set for a similar jump by 2020 to make up nearly 10 percent
of total energy use, from the present 4 percent.
State energy giant CNPC earlier this year
revised up its China gas demand forecast in 2020 by half to 300 billion cubic
meters (bcm), equivalent to three quarters of the amount of oil it now
consumes.
"It's the double accelerator that's
behind our revision:
China
's urbanization and industrialization, as well as the national policy to
strive for sustainable growth," said Jiang Xuefeng, a senior researcher of
CNPC.
Gas offers the world's No.3 economy the
most realistic way to achieve its emission targets -- a 40-45 percent cut in
carbon dioxide per dollar of national income by 2020 from the 2005 level --
compared to the more costly and time-consuming investments in alternative
energy like hydro and nuclear.
The boost in gas will cheer firms like
PetroChina, CNPC's listed unit that controls over 60 percent of China's gas
output, and CNOOC Ltd, which has its largest gas deposit to tap in the South
China Sea operated by Canada's Husky.
It will force traders like Pan Liangwei
to look further beyond his coal business, after having to quit fuel oil trading
as his clients in
Guangdong
-- power plants, porcelain mills -- moved to cheaper coal after oil's
rally in 2008, resulting in dwindling demand for imported fuel oil.
"Once there are pipelines to pipe
gas over, and the price is reasonable, then all will shift to gas," said
Pan from
Guangdong
,
China
's manufacturing hub, where local authorities have embarked on a
$7-billion project to link 21 cities with gas lines.
While oil dealers said power plants --
which used to take a third of
China
's
imported fuel oil -- had all but vanished from the oil import scene, longer
term, gas will mostly hit coal.
Coal, which last year supplied 69
percent of
China
's total energy use, will probably drop 10 percentage points in the
following decade, while the share of oil will hold at 19 percent, sustaining
China
's
support for global oil demand, analysts said.
SHORTAGE
While
China
is widely expected to revamp its gas prices -- long kept below market levels to
support fertilizer makers -- it is the recurring shortage that has prompted
industry players to raise their gas forecasts.
In December, central and southern China
were rationing gas to taxis and factories as a cold spell led to a surge in
heating demand in a country that also is severely short of gas storage.
"There remains enormous pent-up
demand for gas across
China
...current demand is artificially limited by access to supply, as
highlighted by the gas shortage this winter," Bernstein Research wrote in
its January note.
Similar to CNPC, Bernstein upped its
China
gas demand forecast by 55 percent from its previous estimates, pegging 2015
demand at 200 bcm and 280 bcm in 2020, doubling and tripling, respectively, the
2009 level.
"Once resource is secured and
infrastructure in place, the huge demand potential will be released," said
CNPC's Jiang.
A number of major gas pipelines will be
laid over the next three years, including Sichuan-Shanghai, Ordos-Beijing, the
second West-East line, doubling the networks' current capacity.
PetroChina and rival Sinopec Corp are
developing new, big fields such as Dina and Tazhong in northwest Xinjiang;
Sulige in Inner Mongolia; Longgang and Puguang in southwest Sichuan, while
fast-tracking explorations by adding each year 200 bcm of incremental
recoverable reserve, said Jiang.
The start of long-term gas deliveries
from
Qatar
,
Indonesia
and
Malaysia
will double imports of liquefied natural gas by 2011. These will surge
even further in coming years, after firms like Qatargas, Shell, BP and Exxon
Mobil sealed supply pacts with Chinese firms worth over $100 billion.
Piped gas from
Turkmenistan
and
Myanmar
will together amount to 20 percent of
China
's
demand, or 40 bcm, by 2015.
NEW FLATS
Much as
China
's
blistering car sales spur gasoline demand, its frenzied property boom bolsters
demand for gas.
China
added nearly 2 million square meters of new apartment space every day
in 2009, 20 percent more than 2008, official data showed, and most would have
gas links.
"The residential use has often been
under-estimated," said Yan Kefeng of Cambridge Energy Research Associates
(CERA), adding that the potential is huge to replace the more pricey and dirty
"city gas" -- gas made from coal or heavy oil that millions of houses
are connected to.
Industries will be the next key driver,
as China, the world's No.1 aluminum consumer and producer, designed its new
smelters in the last few years to burn gas instead of crude in making carbon
anodes -- half a tonne of which makes every tonne of aluminum.
"Many of the new power plants in
Guangdong
are designed to take gas. Problem is there is not enough gas," said the
former fuel oil dealer Pan.
(from Reuters)