Chinese cities grappling with natural gas shortage

20:37, November 23, 2009      

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The municipal government of Hangzhou, in east China's Zhejiang Province, stopped all natural gas supplies to entertainment businesses at the weekend to guarantee supplies to the city's 410,000 households.

The city government also cut gas supplies to hotels, office buildings and shopping malls by 20 percent.

Chinese cities are grappling for a second week with shortages of natural gas triggered by the unusually early winter weather.

Transport authorities in southwest China's Chongqing Municipality said that 6,200 of the city's 7,000 buses were powered by natural gas and services were pared back as supplies slowed.

The municipal government on Saturday also allowed natural gas-fueled taxi cars to levy a 2-yuan (30 U.S. cents) surcharge per trip to offset their losses.

In Wuhan, capital of central China's Hubei Province, the city'sbiggest natural gas consumer -- Intex Glass (Wuhan) Co. Ltd. -- ison the verge of bankruptcy, because of the gas shortage. The company has over 100 employees on its pay roll.

"Our factory has stopped production for over a week. The company has ordered diesel as a substitute of natural gas to fuel the smelter, to prevent our materials degenerating," said Ao Wanzhi, manager of the company.

The company's daily gas consumption was about 145,000 cubic meters, which accounted a one tenth of the city's total. The company's monthly production value was estimated at 50 million yuan.

The city government started to cut natural gas supplies to industrial users on Nov. 17 in an effort to ensure residential supplies.

A Wuhan resident surnamed Chen, from Tongxin Community, said she had hoped to conserve credit on her gas card as she feared a possible price hike, but the gas companies had limited the gas sales to individual buyers

"You can't buy more gas even if you've got money. I was told I can only buy 168 yuan of gas this month," she said.

A spokesman with the Wuhan subsidiary of the China National Petroleum Corporation said natural gas consumption for heating had soared even before the cold spell hit the city last week.

The city's daily consumption had reached 2.2 million cubic meters before snow came, as compared with the company's planned ratio of 1.46 million cubic meters to the city.

Many people blame the gas supplier for the shortfall. However, a spokesman for China National Petroleum Corporation (CNPC), China's leading oil and gas producer, said Wednesday that its daily natural gas supply has risen from 169 million cubic meters at the beginning of the month to 189 million cubic meters.

He said most of the company's gas transmission pipelines had reached their full capacity.

According to BP Statistical Review 2009, China's natural gas output in 2008 was 76.1 billion cubic meters, as compared with its consumption of 80.7 billion cubic meters in the same period.

It said the country's natural gas consumption has been rising at over 20 percent annually in the past few years.

The prices of natural gas also vary according to natural gas origins. The price of outgoing gas from west China's gas fields are cheaper than that from northeast and north China.

China in August struck its biggest trade deal with Australia, which was worth 41 billion U.S. dollars, to buy natural gas.

Professor Dong Xiucheng, of the China University of Petroleum, said the growth in natural gas demand had far outpaced the supply. The country has not set up big gas reserves to cope with emergencies.

"Natural gas companies do not share their pipeline resources, which makes it difficult to divert gas to the needy in time of crisis," he said.

Lin Boqiang, director of Energy Economy Research Center of Xiamen University, said the government-controlled natural gas price was not reflecting the commodity's true market value.

For example, the cost of sending natural gas generated from gas fields in west China's Sichuan to east China's Shanghai is 3 yuan per cubic meter. However, the retail price now is 2.5 yuan.

"Under the mechanism, energy suppliers are not motivated to expand production to meet soaring demand," he said.

He said the surging demand during cold weather reflected the growing importance of natural gas in Chinese people's daily lives. It was necessary to re-shape the country's natural gas industry development strategy to firstly secure residential use of the resource rather than use it as fuel for petrochemical projects or power plants.

Cao Changqing, director of Pricing Department of the National Development and Reform Commission, said on Thursday that the country's natural gas price reform would not be completed in 2009.

This was the clearest indication so far there will not be a price hike this year by the top economic planner, which is in charge of natural gas pricing mechanism reform.

Source: Xinhua
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