Shift to natural gas may threaten China’s power supplies this winter

The Chinese government has ordered pipeline companies to quickly finish construction of five natural gas pipelines before winter hits. AFP forum photo.

Push to complete natural gas pipelines before winter hits

As part of the Beijing’s efforts to use cleaner burning fuels, the Chinese government is hoping to heat millions of homes in northern China this winter with natural gas instead of coal.

To reach their goal, the government has ordered state oil companies to rush construction of natural gas pipelines to homes and factories.

Some are worried that insufficient infrastructure could cause power outages during the winter. According to Reuters, the National Development & Reform Commission (NDRC) warned that supply and demand conditions could be “serious” this winter.

As part of the plan, residential users will have supply priority over industrial users, including gas-fired power plants, which could result in power losses during peak demand periods or when natural gas supplies run short.

“We are all quite concerned with supply shortages this winter … as we may not have the infrastructure capacity to catch up with the demand growth,” Li Wei, a vice president of Kunlun Energy told Reuters, which operates liquefied natural gas (LNG) terminals and gas production plants.

Small industrial users, including hospitals, have been instructed to switch to natural gas this winter.

According to Wood Mackenzie estimates, China’s heating demand will add 10 billion cubic meters (bcm) to the country’s gas demand. All told, China is forecast to use about 230 bcm this year.

With demand significantly rising, China will need to boost its imports or big industrial customers may face power interruptions, according to Kerry Anne Shanks, head of Asia gas and LNG research at Wood Mackenzie.

“This depends on weather. (But) we worry that China doesn’t have enough storage,” she told Reuters.

Currently, China has about 8 bcm of gas storage capacity, which amounts to about 4 per cent of its demand, said Shanks. She added that this is much lower than other gas-consuming areas like the US and Europe which typically store about 15 to 25 per cent of their annual needs.

So far, long-range forecasts are calling for conditions until December to be unusually cold.

The NRDC is instructing natural gas companies Sinopec and PetroChina to inject gas into their storage facilities before the cold weather settles in. As well, the Chinese government is calling on Sinopec and China National Petroleum Corp to quickly complete construction on five pipeline projects.

By 2020, China expects its gas demand to be between 320 and 360 bcm/year. To meet the demand, more long-term infrastructure is needed.