BIZCHINA / Top Biz News

Sinopec gas find may ease China shortage
Updated: 2006-04-04 15:13

Sinopec Corp.'s major natural gas discovery in southwestern China may help quickly ease shortages of the cleaner fuel in the world's second-biggest energy user, analysts said on Tuesday.

Sinopec Corp, China's second-largest oil and gas producer, said on Monday that its new Puguang field in the land-locked Sichuan province had proven recoverable reserves of 250 billion cubic metres (bcm), making it one of the five biggest in China.

Commercial production is targetted for 2008 with annual output of 4 bcm, equivalent to about 8 percent of China's current gas production. That would be expandable to 8 bcm by 2010.

Sinopec Chairman Chen Tonghai said Sinopec would invest 36 to 38 billion yuan ($4.5-$4.7 billion) by 2010 to bring the field on stream, including the construction of a 1,600 kilometre pipeline from Sichuan province to Jinan city in eastern Shandong.

The gas will be marketed in Sichuan and Chongqing city as well as Henan and Shandong provinces, where demand is very strong, he said.

The field will boost China's proven natural gas reserves by about a tenth, according to BP's Statistical Review from 2004.

The new supplies should help sate would-be industrial consumers who have been left short after oil companies and state planners underestimated growth in demand, threatening Beijing's goal to boost usage and forcing an increased reliance on dirtier coal and pricey oil.

Strong demand in central China and greater needs in Beijing -- coupled with a lack of pipeline capacity and sluggish production efforts -- have drained supplies that were promised to customers on the east coast, industry sources have said.

But the new Puguang field could address some of those needs more quickly than imported liquefied natural gas (LNG), which analysts say is in short supply until after 2010, or promised gas from Russia.

"If the Sinopec project can feed some of the users along the West-East pipeline, that would mean more gas would reach the Shanghai area," said Zhang Chi of Cambridge Energy Research Associates.

He was referring to the country's flagship 4,000-km, 12 bcm per year pipeline linking big gas fields in the remote central Asian region of Xinjiang to the financial hub Shanghai.

Beijing is aiming to more than double the share of natural gas in China's energy mix to 8 percent by the end of the decade in a bid to limit pollution, a target that has been put in doubt by the soaring cost of LNG and by domestic supply constraints.

Efforts to import more natural gas from Russia moved forward last month after Gazprom signed a preliminary deal to build two massive pipelines from the north, although a lack of details on pricing has tempered hopes for quick supplies.

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