KWP China Gas 2004 Final

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KWP China Gas 2004 Final THE IMPLICATIONS OF CHINA’S GAS EXPANSION TOWARDS THE NATURAL GAS MARKET IN ASIA A CHATHAM HOUSE REPORT FOR JAPAN BANK FOR INTERNATIONAL COOPERATION February 2004 Dr Keun-Wook Paik, Associate Fellow Sustainable Development Programme Chatham House 10 St James’s Square London SW1Y 4LE www.chathamhouse.org.uk © The Royal Institute of International Affairs, 2004. This material is offered free of charge for personal and non -commercial use, provided the source is acknowledged. For commercial or any other use, prior written permission must be obtained from the Royal Institute of International Affairs. In no case may this material be altered, sold or rented. The Implications of China’s Gas Expansion towards Natural Gas Market in Asia. Chatham House Report for JBIC, February 2004 Table of Contents 1. China’s Natural Gas Industry ...................................................................................... 1 1.1. A Brief Review on the Natural Gas Industry............................................................ 1 1.1.1. The Role of Natural Gas in China’s Energy Balance....................................... 1 Year .................................................................................................................. 1 1.1.2. Resources.......................................................................................................... 2 1.1.3. Governing bodies and Industry Players ............................................................ 5 1.1.4. Exploration and Production .............................................................................. 8 1.1.5. Coal-Bed Methane Resources ........................................................................ 12 1.1.6. Consumption................................................................................................... 14 1.1.7. Pipeline and Storage Development ................................................................ 17 1.2. Long Term Development Plan: Supply & Demand Projection to 2020 ................ 22 2. Options of Natural Gas Expansion in China............................................................ 27 2.1. Onshore Gas Expansion........................................................................................ 27 2.1.1. West-East Gas Pipeline Development ............................................................ 27 2.1.2. Major Onshore Basin Development in China.................................................. 41 2.1.3. Town Gas (City Gas) Expansion..................................................................... 53 2.1.4. Gas Expansion in Shandong ........................................................................... 61 2.2. Offshore Gas Expansion........................................................................................ 65 2.2.1. Bohai Bay Basin .............................................................................................. 66 2.2.2. The East China Sea Basin .............................................................................. 66 2.2.3. South China Sea Basin ................................................................................... 71 2.3. LNG Import ............................................................................................................. 74 2.3.1. Guangdong LNG ............................................................................................. 74 2.3.2. Fujian LNG....................................................................................................... 80 2.3.3. LNG Supply to Shanghai, Shandong, and Bohai Rim areas.......................... 84 2.4. Trans-national Pipeline Gas Import ....................................................................... 89 2.4.1. Review on Six Supply Options ........................................................................ 90 2.4.2. Factors Affecting Trans -national Pipeline Gas Introduction to China........... 103 3. Implications of China’s Natural Gas Import towards Natural Gas Market in Northeast Asia: focused on Price Comp etitiveness............................................ 113 4. Natural Gas Cooperation in Northeast Asia .......................................................... 114 5. Summary.................................................................................................................... 120 Bibliography .................................................................................................................. 124 Annex 1 The Implications of China’s Gas Expansion towards Natural Gas Market in Asia. Chatham House Report for JBIC, February 2004 1. China’s Natural Gas Industry 1.1. A Brief Review on the Natural Gas Industry 1.1.1. The Role of Natural Gas in China’s Energy Balance The role of natural gas in China’s energy mix is still negligible. As of 2002, the share in China’s primary energy production is a mere 3.2%, and the figure is even smaller in China’s primary energy consumption. Even though natural gas consumption grew by over 50% during the 1990s, it was overshadowed by the 85% rise in oil consumption during the same period. During the 1990s oil consumption shifted significantly from industrial fuel to transportation and petrochemical uses, and electricity became the dominant energy form in households. Due to the limited availability of the supply, natural gas for the most part confined to regional markets, continued to be mainly supplied as industrial fuel and fertilizer feedstock. The Chinese government has made it very clear that it is determined to increase the role of natural gas in China’s energy supply mix within the 10th Five Year Plan (2001-2005) years and beyond. Evidence of this determination includes the construction of the country’s first Liquefied Natural Gas (LNG) import terminal in Guangdong and the decision to build the 4000 km long West-East Pipeline (WEP) to bring natural gas from the Tarim basin in the country’s far west to Shanghai in its far east. The most intriguing question on the natural gas expansion in China will be how far it can go. The boundary of this expansion will give the clue to the China’s energy balance in the coming decades. Table 1 - Primary Energy Production in China (Units: million tonnes of coal equivalent) Year Total Coal Electricity Oil Natural NG share Gas % 1980 628 441 20 149 18 2.9 1985 855 622 37 179 17 2.0 1990 1039 771 50 198 20 2.0 1991 1048 777 49 201 21 2.0 1992 1072 797 50 203 21 2.0 1993 1110 821 59 207 22 2.0 1994 1187 886 69 209 23 2.0 1995 1285 972 75 214 24 1.9 1996 1326 997 82 225 27 2.0 1997 1324 981 91 229 28 2.1 1998 1243 893 93 230 31 2.5 1999 1091 745 83 229 34 3.1 2000 1070 713 83 233 37 3.4 2001 1209 829 105 235 40 3.3 2002 1390 983 124 239 44 3.2 Source: China National Bureau of Statistics, China Statistical Yearbook 2003. Annex 1 The Implications of China’s Gas Expansion towards Natural Gas Market in Asia. Chatham House Report for JBIC, February 2004 Table 2 - Primary Energy Consumption in China (Unit: million tonnes of coal equivalent) Year Total Coal Electricity Oil Natural NG share Gas % 1980 603 435 24 125 19 3.1 1985 767 581 38 131 17 2.2 1990 987 752 50 164 21 2.1 1991 1038 790 50 177 21 2.0 1992 1092 826 53 191 21 1.9 1993 1160 866 60 211 22 1.9 1994 1227 921 70 214 23 1.9 1995 1312 979 80 230 24 1.8 1996 1389 1038 76 250 25 1.8 1997 1378 985 85 281 23 1.7 1998 1322 920 89 284 29 2.2 1999 1301 885 86 302 29 2.2 2000 1303 861 89 321 32 2.5 2001 1349 881 104 328 36 2.7 2002 1480 978 116 346 40 2.7 Source: China National Bureau of Statistics, China Statistical Yearbook 2003. 1.1.2. Resources China has an onshore and offshore sedimentary deposit area of about 6.7 million sq. km, of which Mesozoic-Cenozoic sedimentary basins (with a sedimentary thickness of over 1,000 metres and single basin area of over 200 sq. km) cover about 5.22 million sq. km, with onshore basins covering 3.782 million sq. km and offshore basins 1.49 million sq. km. The unmetamorphosed Palaeozoic rocks (surface exposure) are spread over an area of 1.3 million sq. km . Natural gas resources have been discovered in sedimentary rocks with both marine and continental facies, with geological ages ranging from Late Paleozoic, Mesozoic to Cenozoic. According to the second national natural gas resources survey conducted in 1994 by China National Petroleum Corp (CNPC) and China National Offshore Oil Corp (CNOOP) in China’s 69 sedimentary basins (excluding basins in the Spratly Islands), China’s conventional natural gas geological resources stand at 38.04 trillion cubic metres (tcm), of which 79% or 29.9 tcm are deposited in onshore and the rest 21% or 8.14 tcm in offshore. Map 1 – See Annex 1 Source: Quan Lan and Keun-Wook Paik, China Natural Gas Report Of these 38 tcm reserves, around 89% of the geological resources were found in 13 basins: Songliao, Bohai Bay, Odros, Sichuan, Tarim, Junggar, Turpan-Hami, Qaidam, Middle Yangtze River Reaches, East China Sea, Yinggehai, Qiongdongnan, and Pearl River Mouth. Geologically these 13 basins can be divided into five regions: Annex 1 The Implications of China’s Gas Expansion towards Natural Gas Market in Asia. Chatham House Report for JBIC, February 2004 · The eastern region comprises Songliao and Bohai Bay (onshore are) with natural gas reserves in place of 4.36 tcm, making up 11.5% of the country’s total; · The central region, including Ordos and Sichuan, traps geological gas reserves of 11.52 tcm, accounting for 30.3% of the national total; · The western region covers the remote and less developed Tarim, Junggar, Turpan- Hami and Qaidam basins, where combined
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