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