China-Rus­sia gas deal will not hurt en­ergy co­op­er­a­tion with US

China Daily (Canada) - - CHINA - By WEI TIAN in Shang­hai weitian@chi­

China’s multi­bil­lion-dol­lar gas-im­port con­tract with Rus­sia will not af­fect Bei­jing’s en­ergy co­op­er­a­tion with Wash­ing­ton and may pro­vide more op­por­tu­ni­ties for US com­pa­nies, ac­cord­ing to an en­ergy ex­pert.

“What I see in Bei­jing is that the level of co­op­er­a­tion around clean en­ergy is still very strong,” said Alan Beebe, di­rec­tor of Clean­tech Ad­vi­sory Ser­vices with EY China.

As both coun­tries look to in­crease the use of gas — China to boost its nat­u­ral gas im­ports and the US shale-gas revo­lu­tion re­defin­ing the coun­try’s en­ergy poli­cies — there also is a com­mon in­ter­est for new co­op­er­a­tion in this field, he said in an in­ter­view with China Daily.

China’s 12th Five-Year Plan (2011-15) calls for gas to rep­re­sent 8 per­cent of en­ergy con­sump­tion, up from 4 per­cent at the start of the year.

Bei­jing is draft­ing new poli­cies that will urge power gen­er­a­tors be changed to gas from coal. In the US, there is also a ma­jor de­bate on con­vert­ing coal-pow­ered plants to gas.

In China, the big five Sta­te­owned power gen­er­a­tors ac­count for half the power gen­er­a­tion, and they are mak­ing huge new in­vest­ments in clean tech­nol­ogy. But there are also many old gen­er­a­tors, as well as steel and ce­ment fac­to­ries, burn­ing coal.

“What’s hap­pen­ing in US, and this will hap­pen in China, is that these power plants that used to burn coal will be retro­fit­ted into nat­u­ral gas, which is much cleaner,” Beebe said.

“If you look at com­pa­nies like Gen­eral Elec­tric, they have a whole busi­ness built around gas,” he said, adding that there will be op­por­tu­ni­ties for US com­pa­nies in the face of grow­ing gas con­sump­tion in China.

Beebe’s com­ments were made af­ter a two-decade dis­cus­sion be­tween China and Rus­sia to in­crease en­ergy co­op­er­a­tion made progress last week.

Dur­ing Rus­sian Pres­i­dent Vladimir Putin’s two-day visit to Shang­hai, state-owned China Na­tional Petroleum Corp and Rus­sia’s top gas ex­porter, Gazprom OAO, signed a 30-year nat­u­ral-gas sup­ply con­tract val­ued at $400 bil­lion.

This com­pre­hen­sive en­ergy part­ner­ship will deepen the two coun­tries’ co­op­er­a­tion in oil, nat­u­ral gas, coal, util­i­ties and in­fra­struc­ture con­struc­tion.

Gazprom will sup­ply China with 38 bil­lion cu­bic me­ters of gas an­nu­ally start­ing in 2018 via the east­ern gas pipe­line. The price wasn’t of­fi­cially an­nounced, but Reuters quoted sources as say­ing it is about $350 to $380 per 1,000 cu­bic me­ters.

PetroChina’s CEO Wang Dongjin said de­tails such as ad­vance pay­ment had not been de­cided, and both par­ties might dis­cuss it in the next round of talks.

“From an eco­nomic point of view, the gas con­tract with Rus­sia is a good deal for China, be­cause China does not have enough nat­u­ral-gas re­serves, and it may take years to ex­plore shale-gas re­serves,’’ Beebe said.

“China has been in a dilemma where it has to limit the use of coal while the econ­omy grows, so coal has to be re­placed with some­thing else. Gas is the ob­vi­ous choice,” said Beebe, who has been work­ing for 12 years in China and has wit­nessed the in­creas­ingly se­ri­ous pol­lu­tion prob­lem in Chi­nese cities.

He sug­gested that Sino-US co­op­er­a­tion around shale-gas ex­plo­ration re­mains promis­ing be­cause there are many US com­pa­nies who lead in the tech­nol­ogy and man­age­ment of shale-gas ex­plo­ration, and there are many tech­ni­cal dif­fi­cul­ties in ex­plor­ing the huge re­serves in China.

But he sug­gested that the Chi­nese govern­ment should open the mar­ket more to the pri­vate sec­tor be­cause sta­te­owned en­ter­prises may not be as in­no­va­tive and dy­namic in their tech­ni­cal de­vel­op­ment.

He also said China needs to de­velop in­no­va­tive fi­nanc­ing tools to deal with the longer pay­back pe­riod of in­vest­ment in clean en­ergy, as well as putting greater ef­fort in sav­ing en­ergy.

“In­stead of megawatts, you should talk more about nega-watt, which means how much you can save. China has at­tached much im­por­tance to en­ergy sup­ply over the past decade, but the fu­ture should be more about en­ergy de­mand,” he said.


Ur­ban con­struc­tion ac­counts for more than 40 per­cent of Shang­hai’s land area.

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