Negative energy

Sitting off the southern tip of Lantau, the open spaces of South Soko Island have long been deserted, with few Hongkongers visiting the area. But public awareness of this outpost has changed dramatically since CLP Power's proposal to use the island as the site for a liquefied natural gas (LNG) terminal.

If approved, the facility will be Hong Kong's most important energy base and pave the way for cleaner energy production. The proposed changes to the island have sparked heated debate, exposing tensions between such groups as energy producers, environmental associations, local residents and government departments.

The project involves the construction of three storage tanks on South Soko Island, a jetty, and a 38km submarine pipeline linking the project to the Black Point power station, at an estimated cost of HK$8 billion.

The terminal is said by CLP to be indispensable as its gas reserve in Hainan, from where it has sourced gas for its Black Point power station since 1996, is being used faster than forecast, sparking a need to replace that supply source by 2010.

CLP says the terminal could provide sufficient supplies for it to boost gas-fired electricity production to generate 50 per cent of the company's power output, while also meeting the 2010 emissions reduction requirements.

Without the facility, CLP says, the lack of gas might upset its production goals, forcing it to maintain electricity output by burning more coal, resulting in more air pollution.


The warning is not unwarranted, given that the power supplier remains the city's largest single polluter in terms of sulfur dioxide and nitrogen oxides emissions, although it says it has managed over the past decade to cut harmful emissions.

The case put forward by CLP should have convinced green groups, which are primarily concerned with the deteriorating air quality of Hong Kong.

But the South Soko proposal sparked a backlash from conservationists who said the island should have been designated a marine park in 2002. That plan was delayed because of conflicting land-use proposals. CLP said choosing the site had involved a lengthy screening of 29 potential sites.

The strongest opposition came from WWF, which attacked the project on the grounds that the dolphin and finless porpoise's habitat might be lost to the development. It launched a No-Go-at-Soko campaign on the internet and collected more than 20,000 signed petitions against the site selection.


The campaign, however, has failed to unite green groups in their opposition to the project. Just as when the Kowloon-Canton Railway Corp proposed building a rail link through an important bird habitat in Long Valley in 2002, views among conservationists are varied. Some have privately admitted they face the dilemma of choosing between better air quality, honouring the 2010 cross-border emissions reduction targets or protecting marine habitats.

'Dishonouring the agreement would be detrimental to cross-border environmental co-operation and the whole issue has left green groups handicapped as they face such a difficult choice,' said Hahn Chu Hon-keung, environmental affairs manager of Friends of the Earth.


Some activists believe the dolphin protection campaign may not be the best tactic, although it could help raise public awareness of the project. They fear the ecological battle will be an uphill one, given that CLP has hired the most experienced dolphin experts in Hong Kong to support its case for a South Soko project, rather than one at Black Point, the company's second preferred site.

'One of the difficult arguments facing green groups over the site selection is whether we should protect humans [living near Black Point] or dolphins using the waters around Lantau,' one environmentalist said.

The controversy also has the potential to inflame tensions between residents of Lantau and Tuen Mun.


Lung Kwu Tan residents in Tuen Mun have erected banners opposing the Black Point terminal plan. Lantau residents have also opposed the plan, saying South Soko should be turned into a recreation or tourism spot.

Some Lantau-based groups and air-quality concern groups have shifted to challenging the necessity of building a facility in the city if there are other LNG terminal developments in the pipeline near but outside Hong Kong.

One of the planned developments, proposed by mainland oil giant Sinopec, is for Zhuhai's Huangmao Island - just 40km from South Soko. The proposed terminal is planned to supply Macau's LNG needs, but the developer contends that it is capable of supplying Hong Kong as well. CLP, however, has insisted the Huangmao project is not definite and it would be too small to satisfy its requirements.


Apart from challenging the need for the terminal, some opponents have questioned claims that the Hainan gas reserve is running out at the pace claimed by CLP. Concerns have also been raised over whether the interests of foreign oil giants might be being served by having a terminal at South Soko Island.

Scepticism was heightened when some middle-ranking officials of the Hainan gas field operators told the media they had sufficient supply if production was stepped up. That controversy quickly elicited a joint statement by CLP Power and field operator CNOOC, playing down the comments.

But all of these issues could not be adequately addressed by environmental officials and their advisers, as it was not their duty to scrutinise economic aspects of the project.

'The battleground is no longer confined to the environment or ecology; it has shifted to the political and economic arena,' said Gloria Chang Wan-ki, a campaigner for Greenpeace.

Environmentalists say rigid policy bureau divisions in the government have created barriers that prevent the public from understanding the whole picture. The debate has now exposed interdepartmental tensions, as the economic bureau's mandate to ensure stable power supply at a reasonable cost clashes with the environment bureau's aim of meeting air-quality targets.

The only information about the project that is so far accessible to the public is a 3,500-page environmental impact assessment report. The public had a 30-day window of opportunity to comment, which ended last month. Further details about the financial and economic issues of the plan remain confidential, while a public debate on whether the terminal is needed has never been held.

While pressure groups and members of the public remain unconvinced by the CLP plan, the government also appears undecided. It had not made a firm statement on the plan until last week, when environment minister Sarah Liao Sau-tung defended the facility by saying it would do minimal harm to the environment.

'LNG terminals' impact on marine parks is very small and their co-existence is not a problem,' she said, adding that the facility could enhance marine park management and guard against illegal fishing.

The environment official's low profile on the issue is understandable, as green groups believe it is 'inappropriate' for Dr Liao to pre-empt the environmental impact assessment process.

What further complicates the issue is the ongoing negotiation over power companies' scheme of control agreement, to expire next year, which will likely see the operators' permitted rate of return slashed from double to single digits. Under the scheme, fixed-asset investments such as the LNG terminal qualify for a return. This rule has triggered speculation that CLP will try to inflate its asset base by favouring the South Soko site, which requires a long submarine pipeline - and rush to build it before 2008 to maximise its profit.

While the extent of the impact it would have on power bills has never been disclosed, the power supplier said the cost of building the terminal would be spread out over 20 years and was unlikely to have a significant impact on tariffs. Chief Executive Donald Tsang Yam-kuen has said he would prevent power companies from passing on pollution-control costs to the consumers.

Last week, the Secretary for Economic Development and Labour Stephen Ip Shu-kwan told legislators that consultants had been hired to look into economic issues and the possibility of gas being supplied from the mainland. The fate of the project hinges on these assessments.

He said if the Hainan reserve was found to be able to last three to four years beyond 2010, when stocks are expected to run out, there was a chance the Zhuhai terminal would be able to provide gas to Hong Kong by 2012.

But Mr Ip did not say how the 2010 emissions targets, which he said could not be compromised in any way, could still be met should there be a delay in building the LNG terminal.

Larry Chow Chuen-ho, director of the institute of energy studies at Baptist University, said the assessments could be a delaying tactic so the issue would not be resolved until after the scheme of control talks were over. '[The issue] could be stalled until there are clearer results from the scheme of control negotiations. And probably, it won't be settled until after the election of the chief executive in March,' he said.

The next step in the process comes today, when the Advisory Council on the Environment will discuss the environmental impact assessment report on the proposal. The council will submit a report to the director of environmental protection, who will decide whether or not to issue an environmental permit for construction. CLP will then have to seek formal approval from the economic bureau and the planning and lands departments.

Should the LNG terminal plan be scrapped, one of the possible scenarios facing CLP is that it would need to participate in cross-border emissions trading, which officials said would provide a cost-effective means for it to meet emissions reduction targets. In the worst case, CLP might also have to reduce or stop selling electricity to the mainland, according to environmentalists.

But the prospects for CLP are not as bleak as some believe. A former Energy Advisory Committee member said CLP would eventually win approval to build a terminal as it was too late to work out an alternative plan. 'It's too late to start all over again. The search for alternatives, or a plan for a central LNG facility to be run by the government, or a contractor selected from an open tender, should have begun a long time ago.'