Government's gas blunder no laughing matter
Jake van der Kamp
The government says a deal between CLP and mainland natural gas suppliers has yet to be finalised because it is seeking 'important information' from the power firm.
SCMP, May 16
In my previous career as an investment analyst, it happened one day that the boss decided we would do a joint venture in Pakistan and dispatched me to have a look-see at this bright new opportunity.
It quickly became evident that most companies of any size were either afflicted by a thousand different robbers or run by the army, which tolerated only one robber.
There was an exception, however. Hubco, the Karachi power utility, was privately run, operated an excellent service and actually generated a return for investors.
Hubco had a trump card. The World Bank was a shareholder. Pakistan, perpetually bust, then as now, relied on the World Bank to guarantee payment for oil imports, and the weekly tanker that called in from the Gulf would not connect the pipes until the World Bank gave the all clear.
Thus, every time the authorities decided they might wish to amend their tariff agreement with Hubco, the World Bank would send someone round to tell them, 'Not if you want your oil, you don't', and that would be the end of that.
Spare a second of pity (well, nanosecond anyway) for China Light (I refuse to call it CLaP), which has no such protector in a government that shows every sign of wanting to emulate Pakistan's.
There the company was, some years back, with instructions from the Hong Kong government to go green, which means burning gas instead of coal in its power plants. It promptly worked up plans for a liqueffied natural gas receiving terminal on the Soko Islands to be connected by pipeline to the Black Point power station.
Two things got in the way. Environmentalists found that the stickle-backed, red-finned frog/fish/butterfly might not like it and, across the border, various interests of the sort that always have a fang showing over the lower lip decided they wanted a piece of the action.
Our government gave in. It's a give-in kind of government, as we know. China Light was told to cancel the plans for its own LNG terminal and do a deal for gas with mainland interests instead. Take note that it was specifically told to deal with the mainland only.
As its existing field in the mainland is also running out early, the company was not in the best negotiating position. Six months ago, it did a 20-year deal with Petrochina, with the price of the gas to be linked (I'm on a bit of a flyer here but I'll risk it) to the price of oil.
So, what with being told to burn much more gas and then having to buy this gas at prices multiples higher than gas from the existing and soon-to-be exhausted field, electricity tariffs will now go rocketing up.
To make matters worse, gas prices across the world are in the process of being delinked from oil prices and driven down by the billows of shale gas coming on stream with the new 'fracking' technology.
We in Hong Kong are stuck with the Petrochina deal, however, and could be in a position over the next 20 years of paying tens, maybe hundreds, of billions of dollars more for electricity than we need to pay. And what do our bureaucrats say? Six months after China Light did a deal that they mandated, they pretend to know nothing and further stall approval, already delayed to the point of irresponsibility, on the excuse of needing 'important information'.
They won't get a better price from Petrochina; but, then again, all that I think they are really looking for is an excuse to blame China Light when the real screaming starts about higher electricity tariffs. It will give them ammunition to prise the franchise away from China Light and award it to those fanged mainland interests.
And that leads me to two recommendations. First, to China Light: get your exit strategy ready. If they break faith with you, make them pay for it.
Second, to prospective homeowners: don't buy any flat higher up than the number of stairs you are willing to climb. There will be a premium on lower-level flats soon if the government ever runs power supply in this town. Walking up 40 floors in the dark isn't fun.