PetroChina Should Significantly Expand its Natural Gas Reserves
By Jing Yang
21 Sep 2007 at 10:25 AM GMT-04:00
resourceinvestor.com
BEIJING (Interfax-China) -- PetroChina's [NYSE:PTR] planning and engineering institute has suggested that the company, the listed arm of the nation's largest oil and gas producer, significantly expand its natural gas reserves from 3.1 billion cubic metres at present up to 16 billion to 18 billion cubic metres through the construction of 14 gas storage depots, according to a senior official at the institute.
However, even with such an expanded stockpile, the company's stockpile volume would still fall short of international standards. Under international standards, reserves equivalent to 10% to 15% of annual market gas consumption should be held and seasonally adjusted, while additional reserves equivalent to 3 days of 50% of market consumption are required in case of emergencies, Yang Lina, the deputy director of the institute's production facilities engineering department, said at the 2nd Asia LNG (liquefied natural gas) Summit held in Beijing.
Following such a standard for seasonally adjusted reserves alone, PetroChina would require gas reserves of between 26 billion to 38.5 billion cubic metres of gas by 2020, Yang said.
Despite the possibility of domestic gas price reforms in the future, which would serve to bring domestic gas prices more into line with international levels and thereby curb some low-end demand, China's demand for gas will continue to soar, Yang said. Though deemed by the government to be an inefficient use of gas, low domestic gas prices have caused some power plants to turn to use gas as a feedstock, over the country's abundant coal resources.
China will face annual gas shortages of between 52 billion to 60 billion cubic metres during the 2010 to 2015 period, with shortages widening to 80 billion to 90 billion cubic metres in 2020. At that time, some 31% to 35% of the country's gas consumption is expected to be met by imports. In the meantime, domestic gas output is expected to reach 100 billion cubic metres by 2010 and more than double to 210 billion cubic metres by 2020.
The 7 million to 8 million tonnes of LNG China will see being shipped into the country annually by 2010 is far from closing the gap on these future shortages, Yang added. Out of the 11 LNG terminals the government is planning, only four have secured long-term supply contracts.
The Rudong terminal in Jiangsu Province was the latest terminal to secure long term supplies, with PetroChina recently securing two LNG supply contracts from Australia that will see at least 3 million tonnes of the fuel hitting Chinese shores annually before 2015. However, the Rudong terminal will not be limited to only receiving supplies from Australia, Yang said.
Yang also forecasted that gas supplies in China will remain tight before 2015.
Tight gas supplies in the Chinese market are partly due to the generally insufficient level of natural gas supplies in the Asia-Pacific market, and prices are expected to continue to rise in the near future, said Zhang Weiping, the former deputy chief economist for the China National Offshore Oil Corp. (CNOOC) [NYSE:CEO], the nation's leading LNG importer.
Zhang said that LNG supply reliability is the key problem the industry is facing. For example, potential disruptions to Iranian supplies add an element of uncertainty to two deals Sinopec [NYSE:SHI] and PetroChina have signed with the Middle Eastern country.
By 2020, China may triple its use of gas as a proportion of its total energy consumption mix from the current 3% to 9%, with LNG providing 30% of all gas used, Zhang said. Australia is likely to supply 39 million tonnes of Asia's LNG demand in 2015, while Iran will provide 11 million tonnes, Russia, 5 million tonnes, and Indonesia and Peru, 4 million tonnes each, Zhang said.
The United States, India and China will lead growing world demand for LNG in the following decade, and Qatar is predicted to remain as the global leader in LNG production in 2015. Australia and Nigeria will have overtaken Indonesia and Malaysia as the second and third largest LNG producers by that time, Gunaseharen Ganapathy, the vice president for MISC Bhd's LNG business, said. MISC Bhd is the largest owner of LNG tankers in the world.
Jean-Marc Hosanski, the senior vice president of the French giant Total's [NYSE:TOT] LNG unit, believes post-2010 LNG supplies will face uncertainties due to rising liquefaction and shipping costs. "High growth has resulted in dramatic unit cost escalation, and the economics of many projects are now being challenged," he said.
Hosanski also forecasted that China's LNG demand will increase by more than 25% annually between 2010 and 2015.
© Interfax-China 2007. For more intelligence on Chinese metals and mining, click here or contact David Harman in Hong Kong at david.harman@interfax-news.com or (852) 2537-2262. |
