Increasing energy demand in the Yangtze and Pearl River deltas, the two most developed regions in China, will be met in part with China's second west-east natural gas pipeline.
Construction began this month on the trans-regional pipeline that will carry gas from Turkmenistan and the Xinjiang Uygur autonomous region to Shanghai and southern Guangdong province after traversing 12 provinces and autonomous regions.
The 9,102 km pipeline, which will transport 30 billion cu m of gas yearly, will cost an estimated 142.2 billion yuan ($20 billion).
The project's main line will start from Khorgos in Xinjiang and extend 4,843 km to Guangzhou, capital of Guangdong province. It will also have eight feeder lines.
The western segment of the main line is scheduled to be operational by 2009, followed by the eastern portion in June in 2011, says Jiang Jiemin, general manager of China National Petroleum Corp (CNPC), leader of the pipeline construction.
Most of the gas for the pipeline will be extracted from two contracted fields in Turkmenistan. Two domestic natural gas regions - Tarim and Changqing - will serve as backup sources.
Analysts say that construction of the pipeline is of strategic significance to China and will help optimize the country's energy structure.
The project will further ease the energy supply pressure in the Yangtze and Pearl River deltas. Use of natural gas, a clean energy, will further help with environmental protection, they say.
As the nation's economic and modernization boom continue, China plans to extend its oil and gas pipelines by nearly 60 percent by 2010, Tang Yali, vice-president of PetroChina Natural Gas &Pipeline Co Ltd under CNPC, tells China Business Weekly.
The nation's oil and gas pipelines are expanding at the fastest rate since the Ninth Five-Year Plan period (1996-2000). "The oil and gas pipeline industry has seen 14 percent growth year-on-year since 1996. Between 2000 and 2005, China built more pipelines than it did in all preceding years," he says.
The country's first massive west-east gas pipeline that starts in Xinjiang's Tarim Basin and extends to Shanghai was put into commercial operation in late 2004.
Its 4,000 km length crosses 10 provinces to deliver a12 billion cu m of natural gas yearly. It is projected to supply a stable gas supply for 30 years.
China's second-largest oil firm Sinopec has also started construction of a pipeline project to pump gas from its Puguang field in Sichuan province to Shanghai.
Natural gas boom
As a clean energy, natural gas is increasingly desirable and its use, especially liquefied natural gas (LNG), is set to become a more freely traded worldwide commodity, reshaping the global market's traditional pricing and contracting practices, according to Cambridge Energy Research Associates (CERA).
Global natural gas liquefaction capacity will increase about 30 percent in the next two years to 341 billion cu m from today's 262 billion cu m. About half the investment in the sector is in Ras Laffan in Qatar, with Russia, Yemen, Australia and Indonesia also adding significant capacity, says CERA.
China plans to boost its natural gas production by 50 percent to 90 billion cu m before 2010 when the resource will meet 5.3 percent of the nation's total energy needs, Yang Zhiyi, deputy general manager of Sinopec Natural Gas Co Ltd tells China Business Weekly.
The country's natural gas demand is projected to reach 140 billion cu m in 2010, with about 20 billion cu m imported, he says.
China's production of natural gas rose 23.1 percent in 2007 to 69.31 billion cu m, according to the China Petroleum and Chemical Industry Association.
CNPC's listed arm PetroChina produced 44 billion cu m of natural gas in 2006, an increase of 20 percent, mostly from gasfields in Sichuan, Tarim in the Xinjiang Uygur autonomous region, Changqing field in Shaanxi and Inner Mongolia and its Qinghai gasfield.
The natural gas output of two other oil giants, Sinopec and CNOOC, has also grown. In 2006 their production was 7.3 billion cu m and 6 billion cu m respectively.
Sinopec's Puguang gasfield in Sichuan is the company's biggest discovery in recent years, while CNOOC's LNG terminal in South China's Guangdong province is the first in China.
Natural gas still accounts for a small part of China's total energy consumption, about 3.5 percent of the total, compared to 20 percent in developed countries.
China should adopt a more flexible mechanism for pricing to ensure healthier profits for the industry, says Tang with CNPC. "The pricing mechanism for natural gas in China is subject to further reform so that it can match its international counterparts."