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
Nicholas Newman www.nicnewmanoxford.com
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China’s Oil and Gas Market 2014
15/08/2014
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
Nicholas Newman www.nicnewmanoxford.com
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What’s Driving Demand for Pipelines
15/08/2014
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
Nicholas Newman www.nicnewmanoxford.com
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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.
Nicholas Newman www.nicnewmanoxford.com
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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
East West gas pipeline 4
CNPC Front End Engineering Design stage
1.6 Tcf/y Unknown
East West gas pipeline 5
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
Nicholas Newman www.nicnewmanoxford.com
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China’s gas pipelines
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Nicholas Newman www.nicnewmanoxford.com
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
Nicholas Newman www.nicnewmanoxford.com
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China’s oil pipelines
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Nicholas Newman www.nicnewmanoxford.com
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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
Nicholas Newman www.nicnewmanoxford.com
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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
Nicholas Newman www.nicnewmanoxford.com
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China’s shale oil/gas basins
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Nicholas Newman www.nicnewmanoxford.com
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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
Nicholas Newman www.nicnewmanoxford.com
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China’s major oil fields
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Nicholas Newman www.nicnewmanoxford.com
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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
Nicholas Newman www.nicnewmanoxford.com
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China’s LNG Plants 2012
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Nicholas Newman www.nicnewmanoxford.com
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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
Nicholas Newman www.nicnewmanoxford.com
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NICHOLAS NEWMAN
HTTP://UK.LINKEDIN.COM/PUB/NICHOLAS-NEWMAN/8/8/63B
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WWW.NICNEWMANOXFORD.COM
15/08/2014
Thank you!Any questions?
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