shulin presentation

8/7/2019 Shulin Presentation

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China National Petroleum Corporation

The Development of Chinas

Natural Gas Market

Mr. Su Shulin

June, 2005


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Contents

I. The status quo of the development ofChinas natural gas industry.

II. The major utilization fields of Chinas natural gas.

III. The suggestions for the development ofChinas natural gas industry.


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The Status quo of the Development of

Chinas Natural Gas Industry

1General Introduction

2Status quo of Resources Exploitation

3Status quo of Pipeline Network Construction

4Status quo of Natural Gas Consumption


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Exploitation and utilization of natural gas is of great significance for

ameliorating Chinas energy structure and protecting the environment.

In recent years, Chinas natural gas supply, consumption and pipeline

network construction have entered a booming period.


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Resourcesformation of four major onshore gasfields and two offshore gas fields.

Pipelinespreliminary formation of the nationalbackbone pipeline network with the West-East

Pipeline as the trunk line.

Marketrapid increase of natural gas demand,and emergence of a huge market.


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2Status quo of Resources Exploitation

Chinas natural gas

reserves are mainlyin the onshore Tarim

Basin, Ordos Basin,

Sichuan Basin and

Zaidam Basin, and

offshore Yingqiong

Basin and East Sea

Basin.

Tarim Basin

Ordos BasinZaidam Basin

Sichuan

Basin

Yingqiong

Basin

East Sea

Basin


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2.Chinas Abundant Natural Gas Resources

Projects National Total

Resourcestrillion cubic meters 47Proven reserves100 million cubic meters 49000Remaining recoverable reserves100 million cubic meters 22289

as of the end of 2004


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2Steady Increase of Chinas Natural Gas Production

Unit100 million cubic meters/ year

0

100

200

300

400

500

Output 152 174 262 303 326 341 408

1990 1995 2000 2001 2002 2003 2004


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Comparison between Chinas Natural Gas Production and some

Other Countries100 million cubic meters

Chinas natural gas production ranks 17

th

in the world

0

1000

2000

3000

4000

5000

6000

7000

Britain Norway Italy Germany Russia Saudi

Arabia

United Arab

Emirates

QatarCanada ChinaU.S.


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3Status quo of Pipeline Network Construction

131

1-1

4

Long-distance

pipeline

West-East

Pipeline

12bcm/year

Shaanxi-Beijing

Pipeline

3bcm/year

Sebei-Ningxia-

Lanzhou2bcm/year

Zhongxian-

Wuhan Pipeline

3bcm/year

Second

Shaanxi-Beijing

Pipeline

12bcm/year

Southwest

Pipeline

Network

100bcm/year

Yagang

Pipeline

3bcm/yearransmission capacity of 45 bcm/yearcome into shape


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Among the six national backbone pipelines already built, the West-East Gas Pipeline

has the greatest significance for the development of Chinas natural gas industry.

The West-East Gas Pipeline is the milestone project symbolizing Chinas naturalgas industry entering a new era of rapid development from start-up.

West-Gas PipelinePipe diameter1016mmLength3900 kmDesign Pressure10 MPaTransmission Capacity120108m3/a

Lunnan

Shanghai


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4Status quo of Natural Gas Consumption

Increase of Chinas Natural Gas Consumption from 2000 to 2004(100 million cubic meters)

250 264284 301

360

0

50

100

150

200

250

300

350

400

2000 2001 2002 2003 2004


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Urumchi

Lhasa

Xining

Lanzhou

Shijiazhuang

Beijing

Jinan

Harbin

Changchun

Shenyang

ZhengzhouXian Nanjing

ShanghaiHefei

Wuhan

Nanchang

Hangzhou

FuzhouChangsha

NanningGuangzhou

Daqing

Dalian

Chinas Natural Gas are mainly consumed in peripheral areas

of gas fields and East China

Major Long-distance

pipelines

Peripheral areas

of gas fields

East

China

Market

Ch i l i d t th j f Chi


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Chemical industry as the major consumer of Chinas

natural gas

Chemical

Industry

35%

Power Plant

13%

Civil fuels

24%

Industrial

fuels 28%

Chinas Natural Gas Consumption Structure2003


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Pricing Mechanism

Factory price+ tariff= City gate price

City gate price +distribution price= End user price

Chinas Natural Gas Pricing Mechanism

Factory Price Tariff

Direct supply price

City Gate Distribution End User

Government

stipulates the priceLocal governmentsstipulate the price


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Contents





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II. The major utilization fields of Chinas natural gas

1Various factors contributing to the rapid

development of Chinas natural gas market.

2Development trends of Chinas natural gas market.

3Civil fuels plays the leading role in natural gas

utilization.


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1Government policies support the utilization ofnatural gas

1Various factors contributing to the rapiddevelopment of Chinas natural gas market.

Scientific development concept of People-first, all-

around coordinated sustainable development.

Sustainable energy development strategy of

prioritizing energy saving, diversified structure,

benign environment and market-oriented.

Governments at various levels support the

development of natural gas industry.


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Economic driveChinas GDP has been increasing rapidlyChinas GDP in2004 was 13.65 trillion RMB yuan (around 1.6 trillion U.S. dollars)representing a 9.5% increase over the previous year.

2Rapid economic growth drives the fastdevelopment of natural gas market

0

20000

40000

60000

80000

100000

120000

140000

160000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Chinas GDP Growth1995-2004

Unit: trillion yuan


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Environment protection drivehigher requirement on environmentprotection leads to more emphasis upon the utilization of clean energy

like natural gas.

3Environment Protection Drives the fast developmenof Chinas Natural Gas Market

Government and people from all walks of life attaches greatimportance to environment protection.

Vigorously popularizing the utilization of such clean energies asnatural gas has become one of the effective measures of protectingthe environment and improving air quality.


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Chinas total number of cities is about 660, with 109 million

households and a urban population of 352 million.

In 2020, Chinas urbanization level is to reach 55% from the

current 35%.

Urbanization and improvement of peoples living standardare to promote natural gas utilization in civil gas field.

Infrastructure construction lays a foundation for Chinasmass utilization of natural gas.

4 Urbanization Drives the fast developmentof Chinas Natural Gas Market


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1Forecast of naturalgas demand Chinasnatural gas market isto develop rapidly dueto the requirement ofmacro policies,scientific developmentconcept, and driven byeconomic development,environment protection,and urbanization. Itis estimated thatChinas demand fornatural gas is to

reach 200 bcm in 2020,with an annual growthrate of 11.8%.

2Development trends of Chinas natural gas market.

1 0 0 0

2 0 0 0

36 0

0

500

1000

1500

2000

2500

Up 11.8% annually

Forecast of Chinas Natural Gas Demand Increase

(100 million cubic meters)

2004 2010 2020


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Taipei

Beijing

It is estimated that the

natural gas consumption

in northeast, Bohai Bay

area, Yangtse River

Delta and Southeast

coastal areas is to

account for over 60% of

the countrys total

consumption.

2Natural Gas Demand Allocation

Northeast

Yangtse River

Delta

Bohai Bay

Area

Southeast


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Natural gas consumption structure is to be optimized, civil use and

power generation constitute major utilization of natural gas.

Forecast of Chinas Natural Gas Consumption Structure in 2020

15%

22%

27%

36%

0% 10% 20% 30% 40%

3Natural Gas Consumption Structure

Civil use

Power

Generation

Industrial

Fuels

Natural gas

Chemical


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Currently, natural

gass proportion inprimary energy is less

than3which is

expected to increase

steadily, and reach 8-

10 in 2020.

2.6%

2004

2020

6.0%

2010

8.0%

4Natural Gas Proportion in Primary Energ


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Beijing

4

1Distribution of Chinas Civil Gas Market

Major civil

gas market

3Civil fuels plays the leading role in natural gas utilization.

Natural gas

gradually

becomemajor fuel of

Chinas civil

gas market.


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2Natural gas becomes major source of Chinas civil gassupply

It is estimated that in 2020, natural gass popularization rate is to reach 60-70%and

becomes major source of Chinas civil gas supply.

65%

35%

Forecast of natural gas proportion in civil gas in 2020

Natural gas

Other fuels


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3Development Trend of Civil Utilizationof Natural Gas

The scale of civil gas supply system is getting larger

Civil gas supply is to expand the utilization into other

industrial fields such as natural gas cars, heating and freezing

together with the enhancement of popularization rate of

natural gas.

Distributed natural gas freezing, heating, power combined

supply system has broad room for development.


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4Civil Gas Use Typical CaseBeijing

Beijing used to be one of Chinas seriously polluted cities.

Statistics shows that the annual amount of sulfur dioxide,

nitrogen oxides and atmosphere suspended particulates are

0.080

0.140 and 0.364 mg respectively.

In order to improve Beijings air quality, the municipal

government decided to utilize natural gas to replace fuelslike coals.


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Rapid growth of Beijings natural gas consumption

(Unit:100 million cubic meters)

In 1997, Beijings natural gas consumption was merely 0.18 bcm.

In 2004, Beijings natural gas consumption reached 2.53 bcm.

1.83.8

7.611

14.518.2

2225.3

0

5

10

15

20

25

30

1997 1998 1999 2000 2001 2002 2003 2004

Marked Improvement of Beijings


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Marked Improvement of Beijings

Atmosphere Quality

In 229 days of 2004, the citys urban air quality was and above Grade II.

Days when Air quality was and

above Grade II

Pollutant emission


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Contents




III The market development strategies of Chinas


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III. The market development strategies of Chinas

natural gas industry

1Intensifying Resources Exploration andExploitation

2Accelerating the Construction of NaturalGas Pipeline Network

3Strengthening International Cooperation


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1Intensifying Resources Exploration and Exploitation

Chinas natural gas exploration and development has a

bright future.

To ensure the rapid growth of domestic natural gas production through

intensified exploration.

Strengthening the exploration and development of coal-bed methane

and promote the utilization of it.

Chinas Natural Gas Industry Development


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Steady Increase of Chinas Domestic Natural

Gas Proven Reserves (trillion cubic meters)

10

4.9

6.5

0

2

4

6

8

10

12

2004 2010 2020

Chinas Natural Gas Industry Development

Owns Good Resources Support

407

850

1200

0

200

400

600

800

1000

1200

1400

2004 2010 2020

Steady Increase of Chinas Domestic Natural

Gas Production (100 million cubic meters)


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2Accelerating the Construction of Natural Gas Pipeline Network

Construction of nationwide backbone pipeline network.

Establishment of liaison and distribution system with liaisonline as the bridge.

Building storage facilities with underground gas storage as

the core.

Diversified gas supply via onshore pipeline and offshore

LNG.

Stipulating emergency and peak shaving schemes.


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Personnel training: collaborate in technology, management and

commerce training

Technology transfer: actively import and absorb advanced technologies

from developed countries

Strengthening cooperationactively participating in domestic andinternational cooperation of natural gas projects. Importing oversea

natural gas, Chinas guideline in natural gas utilization is Domestic

production playing dominant role and importation as supplement.

3Strengthening International Cooperation


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Thank you

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