In­vest­ment ‘wel­come’ in oil and gas

Of­fi­cial: LNG ter­mi­nals, pipe­lines among projects to be opened fur­ther

China Daily (Canada) - - BUSINESS - By LYUCHANG lvchang@chi­nadaily.com.cn

The gov­ern­ment will en­cour­age pri­vate-sec­tor in­vest­ment in liq­ue­fied nat­u­ral gas ter­mi­nals and oil and gas stor­age and dis­tri­bu­tion fa­cil­i­ties, a se­nior of­fi­cial at the Na­tional En­ergy Ad­min­is­tra­tion said on Thurs­day. Liu Deshun, di­rec­tor-gen­eral of the depart­ment of oil and gas at the na­tion’s top en­ergy plan­ner, said that there is “huge po­ten­tial” for growth in in­fra­struc­ture for oil and gas stor­age and dis­tri­bu­tion.

“If you look at the de­mand for nat­u­ral gas in China, the build­ing of fa­cil­i­ties (for) stor­age and dis­tri­bu­tion is far from enough,” he said. “Com­pared with de­vel­oped mar­kets such as the United States, we are still at an early stage.”

Liu made the com­ments at a news­con­fer­en­cein Bei­jingheld by the Na­tional De­vel­op­ment and Re­form Com­mis­sion.

China has built 120,000 kilo­me­ters of on­shore oil and gas pipe­lines, ex­clud­ing those in the oil­fields. Th­ese pipe­lines form the back­bone of the oil and gas mar­ket, Liu said.

Nat­u­ral gas has be­come an im­por­tant op­tion in the world’s largest en­ergy con­sumer, and it plays a vi­tal role in op­ti­miz­ing the en­ergy mix. Ear­lier this year, Rus­sia and China signed a $400 bil­lion deal for the con­struc­tion of a pipe­line that will sup­ply 30 bil­lion cu­bic me­ters of nat­u­ral gas a year to China.

Nat­u­ral gas con­sump­tion in China stood at 167.6 bil­lion cu m in 2013, up 13.9 per­cent year-on-year, while nat­u­ral gas im­ports rose 25 per­cent.

With huge amounts of lo­cal gov­ern­ment debt and mount­ing pres­sure to sta­bi­lize eco­nomic growth, the State growth rate of China’s nat­u­ral gas con­sump­tion in 2013 from

a year ear­lier length of the coun­try’s on­shore oil and gas pipe­lines, ex­clud­ing

those in oil­fields Coun­cil, China’s cab­i­net, is rolling out mea­sures to draw­more pri­vate cap­i­tal into pub­lic-sec­tor projects. The steps it has ap­proved in­clude re­duc­ing bar­ri­ers to en­try in some mar­kets and us­ing the pub­lic-pri­vatepart­ner­ship in­vest­ment model.

Li Pu­min, a spokesman for the NDRC, said dur­ing the news con­fer­ence that the pri­vate in­vest­ment model will fo­cus on seven fields in­clud­ing trans­porta­tion, wa­ter con­ser­va­tion, mu­nic­i­pal in­fra­struc­ture and en­ergy fa­cil­i­ties.

He said that such steps will help dis­man­tle do­mes­tic mo­nop­o­lies and es­tab­lish sound, dy­namic mar­kets.

But Sun Hongzhan, an an­a­lyst at Min­sheng Se­cu­ri­ties Co Ltd, said many pri­vate firms that have in­vested heav­ily in the pub­lic sec­tor of­ten strug­gle to reach equal sta­tus with their State-owned coun­ter­parts.

“Pub­lic sec­tors such as in­fra­struc­ture con­struc­tion can’t be com­pletely opened to the pri­vate sec­tor, be­cause someof them ex­ist for the pub­lic good and their value can’t be set by the mar­ket,” he said.

And in some other fields, such as the cap­i­tal-in­ten­sive nu­clear in­dus­try, few­pri­vate­sec­tor com­pa­nies have the nec­es­sary fi­nan­cial or other re­sources to par­tic­i­pate, Sun said.

Chi­na­maymerge its two big­gest nu­clear power com­pa­nies as it bids to com­pete for con­tracts in over­seas mar­kets, three in­dus­try of­fi­cials fa­mil­iar with the sit­u­a­tion said on Thurs­day.

Plans have al­ready been sub­mit­ted to the StateOwnedAs­sets Su­per­vi­sion andAd­min­is­tra­tionCom­mis­sion tomerge China Na­tional Nu­cle­arCorp with China Gen­eral Nu­cle­arPow­erCorp, saidXuLianyi, a for­mer gov­ern­ment of­fi­cial and in­dus­try con­sul­tant.

The two com­pa­nieswere de­lib­er­ately set up as ri­vals to com­pete for projects in China and abroad. But un­der gov­ern­ment prompt­ing, they have co­op­er­ated on a sin­gle re­ac­tor brand, Hua­long I, with the in­ten­tion of even­tu­ally mar­ket­ing it abroad.

“The merger be­tween CGNandCNNCis in­evitable,” saidXu.

He said the pro­pos­als had re­ceived strong back­ing fromthe gov­ern­ment.

Xu nowserves as a se­nior ex­pert at State Nu­clear Pow­erTech­nol­o­gyCorp, a company that builds and de­vel­ops third-gen­er­a­tion nu­clear tech­nol­ogy, in­clud­ing the United States-based West­ing­house Elec­tric Corp’s AP1000re­ac­tor.

Xu con­firmed that the SASACis also re­view­ing another merger in­volv­ing SNPTCand one of the coun­try’s big five elec­tric­ity gen­er­a­tors— China Power In­vest­men­tCorp.

Of­fi­cials with the SASAC andCNNC­said they­were not aware of the merger. CGNwas not im­me­di­ately avail­able for com­ment.

Last year, CNNCand CGN­made a joint bid to takeas­t­akeof upto40 per­cent in a re­ac­tor project at Bri­tain’s Hink­ley Point.

The firstHua­long I re­ac­tor is ex­pected to be ap­proved for con­struc­tion soon, with lo­cal me­dia re­ports say­ing it­would be built in Fu­jian prov­ince.

Two other nu­clear company of­fi­cials con­firmed the merg­er­pro­pos­als on Thurs­day, with one say­ing that it was “ridicu­lous” that the com­pa­nies should be com­pet­ing with one another for over­seas re­ac­tor projects.

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