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Sinopec ponders new route for Shandong gas pipeline

Sinopec

Shift to Shanghai likely as eastern China gas shortfall looms

China Petroleum and Chemical Corp (Sinopec) may re-route its planned 1,600km pipeline to deliver gas from one of the mainland's largest gas fields in Sichuan province to Shanghai instead of Shandong province, according to a source at the company.

The plan, subject to central government approval, comes only three months after Sinopec announced the project and underlines strong gas demand in the lucrative eastern China market.

It also comes despite the fact that PetroChina's west-to-east pipeline is already serving the market, and China National Offshore Oil Corp's planned liquefied natural gas terminal could start pumping imported gas by 2009.

'PetroChina's west-to-east pipeline and gas from offshore China will not be sufficient to plug the supply gap in east China,' the source said.

'The central government has given us the green light to build the pipeline to Shandong, but at the moment, we see better market opportunities in east China.'

The source said Shandong would be well served by a sub-pipeline linking PetroChina's west-to-east pipeline and its Shaanxi-to-Beijing pipeline.

The sub-pipeline, completed last year, passes through Shandong, which is also served by pipelines linking Sinopec's gas fields in Shandong and Inner Mongolia.

On the contrary, east China is suffering from a lack of affordable gas, especially in the power sector where at least 4,000 MW of gas-fired plants were not expected to be able to secure sufficient gas to operate when they come online, according to China Electricity Council.

A government source said a decision on whether to approve the new route of Sinopec's project in Sichuan was expected within the next few months.

According to a senior official at Sinopec's offshore gas production joint venture with CNOOC, the east China market is estimated to have gas demands of more than 15 billion cubic metres by 2009.

Commercial production of the Puguang field in Sichuan is targeted for 2008 with annual output of four billion cubic metres, expandable to eight billion cubic metres by 2010.

The field has proven recoverable reserves of 250 billion cubic metres.

Sinopec chairman Chen Tonghai said in April the company would invest 36 billion to 38 billion yuan by 2010 to bring the field online, including some 13 billion yuan of investment on the pipeline.

The Sinopec source said the new route's investment cost should not be very different from the original budget.

Sinopec planned to focus Puguang's gas sales on eastern China's industrial sector, largely to supply its own petrochemical plants, and to a smaller extent to serve the power sector, the company source said. Sinopec was also considering a branch pipeline to Guangdong province from the giant gas field, the source added.

diversion on demand

At least 4,000 MW of power plants face gas shortage

Sichuan field may meet half

of the projected demand

Sinopec to spend 38b yuan on piping gas from giant field

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