China National Petroleum Corp (CNPC), the mainland's largest oil and gas producer, plans to spend 630 billion yuan (HK$791.8 billion) over the next decade to build four more long-distance gas pipelines that would see 65 per cent of the nation's cities connected to its network.
This is according to company veteran Wang Bingcheng, a former deputy head and chief engineer of Daqing Petroleum Administration Bureau, which ran the country's largest oilfield before the stock market listing of CNPC's main unit PetroChina.
PetroChina now runs the field, as well as the first two west-to-east pipelines. It is building the third one to meet surging annual gas demand, which doubled to 143 billion cubic metres (bcm) in the five years to last year, and is projected to rise to 350 bcm by 2020.
Demand is being driven by industrialisation and urbanisation. The latter is putting former rural residents on to gas networks in the cities, while factories and power plants are increasingly turning to cleaner-burning gas.
"The additional pipelines will source gas from Central Asia nations like Turkmenistan, Uzbekistan and Kazakhstan, as well as Russia and domestic fields in China," Wang told the South China Morning Post at an international forum for clean energy in Macau on Tuesday. "When completed, the network will span the southwest, central, southeast, Bohai Bay, Yangtze River Delta and Pearl River Delta regions."
In a presentation to the forum, he said lines four to seven of the west-to-east-pipeline would have a combined annual throughput capacity of 242 bcm. The 17 bcm, 4,200km line linking the Xinjiang autonomous region and Shanghai was completed in 2004, and the second 4,900km, 30 bcm one connecting Xinjiang and Hong Kong was finished late last year.
PetroChina began building the 30 bcm, 120 billion yuan third line late last year from Xinjiang to Guangdong and Fujian; it is scheduled to be completed by 2015. A PetroChina spokesman said it was too early to comment on whether it would be the investor in lines four to seven.
CNPC yesterday signed a gas import deal with Russian gas giant Gazprom with undisclosed "basic terms", following a 2006 pact on the import of 68 bcm per year. CNPC also inked a deal yesterday to take a 20 per cent stake in Gazprom rival Novatek's US$20 billion Yamal liquefied natural gas project.
This came a day after CNPC agreed to buy an additional 25 bcm of gas from Turkmenistan, on top of the 40 bcm that China had already contracted to buy, making Turkmenistan the largest foreign gas supplier to China. Last year's supply was 20 bcm.
CLSA head of Asia oil and gas research Simon Powell said the 242 bcm capacity of the planned lines four to seven seemed "too high", as compression technology could raise the capacity of the current three lines.
Wang said the new pipelines would be open to co-investments with other firms.
To cut its debt load, PetroChina in June sold half stakes in part of its pipelines to two fund management firms, and introduced Baosteel Group, the National Social Security Fund and an infrastructure fund backed by private businesses under the All-China Federation of Industry and Commerce as minority investors in line three.