What are the challenges facing china's pipeline network

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Nicholas Newman www.nicnewmanoxford.com

Are China’s Pipelines Ready: to meet its energy needs by 2030?

A look behind some of the challenges, plans and projects being developed to deliver fuel to feed China’s booming economy and improve its environment

Nicholas Newman

Nicnewmanoxford.com

August 2014

15/08/2014


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China’s Oil and Gas Market 2014

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2013 2030 Forecasts

Oil Consumption 10.7 million bbl./d 240% increase

Oil Imports 4.5 million bbl./d

Oil Production 4.5 million bbl./d

Gas Consumption 144 bcm per year 250% increase

Gas Imports 53 bcm per year

Gas Pipeline Imports

25 bcm per year

LNG Imports 28 bcm per year

Gas Production 5.5 tcf per year

Sources: BP, China Daily, xinhuanet.com


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What’s Driving Demand for Pipelines

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7.5% economic growth per yearChina aims is to reduce dependence on coal

power generation from 70% today to 50% of overall energy usage by 2030

The need to cut air pollution in China’s major cities

The need to replace/convert town gas systems A study has uncovered nearly 20,000 disaster

risks in its oil and gas sectorMany pipelines over 40+years old and often built

with poor quality materials


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Reasons for Pipeline Construction

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to bring in, and distribute, rising imports from Russia, Central Asia and Myanmar.

to build up China’s intra-provincial pipeline network, which will benefit China’s 1,890 plus city gas franchisers and establish a nationwide pipeline grid to aid domestic distribution

to bring shale gas from sites to marketbuild the associated gas pipelines at planned

LNG import terminals.


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Some Current Pipeline Plans

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Project Project Leader State of Progress Capacity Estimated Date of Completion

East West gas pipeline 3

CNPC Being constructed 1.1-Tcf/y On-stream 2015


CNPC Front End Engineering Design stage

1.6 Tcf/y Unknown


CNPC Front End Engineering Design stage

1.6 Tcf/y Unknown

East Siberian gas pipeline

CNPC/Gazprom

Proposed 1.3 Tcf/y Unknown

Taiwan Straits gas pipeline

CNPC/CPC Corp. Proposed Unknown Unknown

Source: Various sources


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China’s gas pipelines

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7China’s gas network 2014

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Gas pipelines 250,000 Kilometres

City networks 2,166

Key natural gas processing plants 64

Gas power stations 187

LNG import terminals 43

LNG satellite plants 479

Shale gas fields 167

Onshore gas fields 662

Offshore gas fields 114

Coal bed methane fields 315

Coal to gas project plants 81

Source: IEA, EIA, China National Gas Map


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China’s oil pipelines

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China’s oil network 2014

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Crude pipeline network 20,000 km

Refined product pipeline network 18,000 km plus

Strategic oil storage capacity 500 million barrels

Onshore oilfields 791

Offshore oil fields 208

Critical refineries 104

Oil ports 101

Source: China Petroleum Map, IEA, EIA


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Problems facing pipeline industry

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Slow pace of market reformInefficient state owned companies and

government agenciesThe need to reform the domestic capital

markets to ensure sufficient capital is available for pipeline construction

A business environment that favours the state sector at the expense of new private sector

The reluctance of state energy companies to share pipeline access


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China’s shale oil/gas basins

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Operational Challenges

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Pipelines operating in hostile environments, due earthquakes and sub-zero temperatures

Many pipelines constructed using poor quality steel and other materials

Lack of adequate sensors to detect the drop in pressure typical of a leak or breach or even basic data needed to monitor the system

Negligence of planning authorities and developers

Criminal theft of fuel and vandalism


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China’s major oil fields

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Government action

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A "new" law (as of 2010) the first of its kind to be implemented in China to protect crucial oil and natural gas infrastructure

Chinese Government have instigated a national safety review of all its oil and gas pipelines.

Encouraging the partial privatisation of state energy companies

Reforms to price controls – as of August 2014 customers paying $10.81 per 1,000 cubic feet, double US rate

Measures to encourage private investment


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China’s LNG Plants 2012

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Proposed Solutions

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Need to end the duopoly of CNPC and Sinopec

Introduce transparency into regulation and markets

Implement free market liberalisation and price reforms

Privatise state-owned enterprises Encourage both local and increased foreign

investment and competition by lowering market barriers

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Conclusion

China is unlikely to construct sufficient oil and gas pipeline capacity by 2030 to meet its environmental goals and energy needs, unless it overcomes many structural challenges by reform of the energy sector a major political and economic priority

15/08/2014Nicholas Newman www.nicnewmanoxford.com

http://www.nicnewmanoxford.com/


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15/08/2014

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