China should build stockpiles to head off energy-supply concerns

BEIJING - China should consider establishing strategic reserves of natural gas, because of the nation's growing appetite for the fuel and a burgeoning dependence on imports, industry experts said.

"China's import-dependency ratio for natural gas is about 8 percent at present, and imports will grow rapidly year by year when more source gas materializes and more import projects are in the pipeline," said Zhou Zhibin, deputy general manager of PetroChina Southwest Oil & Gas Field Company on Tuesday.

Zhou urged that China should establish national strategic inventories to ensure energy safety. He added that emergency natural gas reserves are also required.

Related readings: PetroChina to build natural-gas storage tanks  Natural gas stockpiles crucial to energy security  Natural gas demand to soar  Natural gas consumption to increase

China's natural gas consumption will continue its growth momentum in 2011 to reach up to 130 billion cubic meters (cu m), according to a recent report from the China Energy Research Society.

The country's natural gas market is projected to hit 260 billion cu m a year by 2015, accounting for about 8 percent of the nation's total energy consumption, according to Thomas King, president of BP (China) Holdings Ltd in Shanghai.

The country's apparent consumption - consisting of domestic output and imports, but excluding exports - of natural gas was around 106 billion cu m last year, signaling growth of almost 20 percent from 2009.

The surge in demand for the fuel has further outpaced supply, despite the recent expansion of the country's gas infrastructure.

"Southwestern China, for instance, saw its gas-supply gap widen from 200 million cu m in 2003 to 3.5 billion cu m in 2010. Some cities in the region even have a supply gap as wide as 40 percent," said Zhou.

State-owned oil firms in China, the world's second-biggest energy consumer after the United States, have accelerated their acquisitions of overseas gas assets during the past year. Late in 2010, China National Offshore Oil Corp Ltd (CNOOC) signed a $2.16 billion deal to purchase a 33.3 percent interest in Chesapeake Energy Corp's Eagle Ford Shale Project in the United States.

In addition, China has also increased the number of natural gas networks and liquefied natural gas (LNG) terminals across the country to facilitate supply.

China had built 34,000 kilometers (km) of long-distance gas pipelines by the end of 2010. An additional 17 pipelines with a combined length of 24,000 km will be established between 2011 and 2015, BP's King said.

CNOOC currently has three LNG projects on stream, including one in Shanghai, while six more, situated in the provinces of Guangdong and Zhejiang and the city of Shenzhen, are under construction or at the planning stage, said Xing Yun, chief geologist at the technology and research center of the CNOOC Gas and Power Group.

According to CNOOC, the country's biggest offshore oil and gas producer by output, the new projects will have a total designed capacity of 290 million tons a year by the end of 2020.

The company received 9.4 million tons of LNG through its three established LNG terminals in 2010.