Zhang Guobao: The Road to the Development of Natural Gas in China - Concentrate on Power to Make Big Events, and Ownership Promotes Development

Editor's Note: On September 13, the "International Natural Gas Cooperation and Development Forum" was held in Wuhan. Mr. Zhang Guobao, former deputy director of the National Development and Reform Commission and former director of the National Energy Administration, was invited to give a keynote speech. Mr. Zhang Guobao authorized the economic network to publish his speech exclusively.

The development of China's natural gas industry can be said to be an old but young industry story; the road to the development of China's natural gas, in general, is to concentrate on power to achieve great things, and ownership to promote development.

I. A simple review of the development of China's natural gas industry

Natural gas is a kind of energy source with a long history in China, and it is also a short-lived new energy source for large-scale use. China's Sichuan Basin has natural gas resources and underground salt mines. It was recorded more than 2,000 years ago. Sichuan Zigong uses natural gas to boil salt brine for salt production. There is a book called "Heavenly Creations", which is written with natural gas to produce salt. But until 40 years ago, when China implemented the reform and opening up policy, natural gas was only an energy source known to a few people in a few regions. At that time, in China's energy structure, natural gas was negligible and negligible. In 1997, China built the first long-distance natural gas pipeline, the Shaanxi-Beijing pipeline, which was 918 kilometers long and transported natural gas to Beijing. Marine gas was discovered in the Beibu Gulf area of ​​Hainan Island, and a pipeline from Yinggehai to Hong Kong in the Beibu Gulf of Hainan Island was built to supply 2 billion cubic meters of natural gas per year to Hong Kong. In the East China Sea, the original Ministry of Geology and Minerals investigation team, later called Xinxing Company, also found a small amount of natural gas in the Pinghu gas field in the East China Sea near Shanghai, which can supply 400 million cubic meters of natural gas per year. At that time, I was already working in the National Planning Commission. I remember that the Shaanxi-Beijing pipeline was also allocated 200 million cubic meters per year in Tianjin and 100 million cubic meters per year in Xi'an, but Tianjin is still worried about it. Until 2003, natural gas accounted for only 2.3% of China's energy. At that time, natural gas in many developed countries in the world accounted for more than 10% of energy, and some countries even reached 30%. For example, in the United States, Russian natural gas has become a major clean energy source. At that time, in China, natural gas was mainly used as a living gas for urban residents, and a small amount was used to produce fertilizer and power. After 2000, the Chinese government began to plan the construction of a West-East Gas Pipeline from Xinjiang to Shanghai, with a total length of about 4,000 kilometers and a design scale of 12 billion cubic meters per year. We have never built such a long and large capacity gas pipeline. We have also sought to cooperate with foreign companies such as Shell, but we have not succeeded. In the end, we only rely on ourselves to build. At that time, the material of the pipeline, X70 steel, and the pressure-burning unit for pressurization, we would not do it. We started to explore the X70 steel from the steel plant. We have not built a large gas storage tank. Because of the needs of the West-East Gas Pipeline Project, we used the underground salt mines in Jintan, Jiangsu Province to build the first large gas storage. However, the West-East Gas Pipeline Project was completed in only two or three years, and is connected to the Jingbian and Shaanxi-Beijing pipelines to supply natural gas to Beijing and Tianjin. The West-East Gas Pipeline has benefited more than 200 million people. His important significance is to create an era in which China began to use natural gas on a large scale. In the words of Premier Zhu Rongji, it was painted on the land of China. Later, the second phase of the West-East Gas Pipeline Project was built to send natural gas from Xinjiang to Guangdong and Hong Kong.

Second, China's natural gas cooperation

Since China's discovered natural gas reserves cannot meet the rapidly growing market demand, we began to negotiate with Russia and Central Asian countries to import their pipeline natural gas after 2005. In 2009, China and Central Asia’s heads of state of Turkmenistan, Uzbekistan and Kazakhstan personally promoted the establishment of China’s first long-distance gas pipeline introduced from abroad, called the Central Asian natural gas pipeline, which opened up China’s imports. The history of natural gas has begun international cooperation in natural gas, and China has become a net importer of natural gas. The initial design capacity of the Central Asian natural gas pipeline is 30 billion cubic meters per year. Now, three pipelines A, B and C have been built, and the same route is taken, which is connected with the West-East Gas Pipeline. The D line is still under construction. The pipeline is different from the A, B and C lines. The contract quantity of natural gas imported from the Central Asian natural gas pipeline has also expanded to 68 billion cubic meters per year. China has imported more than 190 billion cubic meters of natural gas through the Central Asian natural gas pipeline.

Later, we cooperated with Myanmar and built the China-Myanmar natural gas pipeline with the China-Myanmar crude oil pipeline. Its gas source is the offshore natural gas developed and developed by Daewoo Corporation in the Bay of Bengal, Myanmar. The production volume is only about 5 billion cubic meters a year and is sold to China. But now it has not yet reached the design capacity of 5 billion cubic meters per year. But this pipeline has used natural gas in Yunnan Province, a remote southwestern mountainous area of ​​China. Now China has only two natural gas pipelines imported from land. Russia's eastern natural gas pipeline is under construction and it is expected that ventilation will be completed next year.

At the beginning of this century, we planned the LNG industry at the same time as we planned the natural gas pipeline in Central Asia. After fierce bidding competition, we initially selected LNG receiving stations in Guangdong Daya Bay and Fujian to import LNG from Australia and Indonesia, and later expanded to Shanghai imports Malaysia LNG. Now we have built and operated 11 LNG receiving stations and are growing rapidly. LNG importing countries have also expanded from Australia, Indonesia, and Malaysia to Qatar, Brunei, and BG's coalbed methane LNG in Queensland, Australia. Similarly, we have not been able to produce steel plates for LNG carriers and LNG storage tanks at the beginning, and we are now able to export LNG carriers to Mitsui, a Japanese merchant ship. In less than 20 years, China has grown from a country with a negligible share of natural gas to the world's third largest natural gas consumer after the United States and Russia. But China currently accounts for only 5.9% of the world's natural gas consumption, while the United States and Russia account for 33% of the world's natural gas. At present, the proportion of natural gas in China's energy has already accounted for 6.3%, which is still far from the developed countries. However, due to the large market space, natural gas is growing faster than other energy sources in China. Even in the case of relatively weak energy demand in recent years, natural gas is still growing at a faster rate. In the first half of this year, it increased by 15.2% over the same period of last year. The imported natural gas is 41 billion cubic meters, and the domestic production is 74.3 billion cubic meters. The dependence on imports has reached 36.5%. China's natural gas has no exports, but in order to maintain Hong Kong's prosperity and stability, we have extended the West-East Gas Pipeline to Hong Kong through submarine pipelines, supplying 1 billion cubic meters of natural gas per year to Hong Kong. The Taiwanese business community is also very interested in importing natural gas from the mainland, especially in Kinmen County, which is adjacent to the mainland. I have been invited to visit. Even if the submarine pipeline reaches Taiwan Island, it can be done now in engineering. The current obstacles are not engineering and technical issues, mainly the political relationship between the two sides of the strait, depending on the attitude of the Tsai-English authorities.

Third, concentrate on doing big things, develop together with multiple ownership systems, and China's urban gas industry is growing rapidly

China's natural gas industry has grown from scratch, and now it has already connected the West-East Gas Pipeline, Shaanxi-Beijing Pipeline, Sichuan Gas Pipeline, Coastal Natural Gas Pipeline, Central Asian Gas Pipeline, and China-Myanmar Pipeline into a nationwide A natural gas pipeline network that is integrated with the coastal LNG receiving stations. This speed of construction is unique in the world. The Nabucco pipeline in Central Asia through the Caspian Sea to Europe was initially earlier than our Central Asian gas pipeline, but no substantial progress has been made so far. Our natural gas pipeline network not only has the superiority of the central government to concentrate on doing big things, but also supports many enterprises in various provinces and cities across the country, reflecting the superiority of socialism to concentrate on doing big things. At present, the backbone pipelines are mainly built and operated by central enterprises. They have strong capital and strong technical strength, but there are also private enterprises and foreign-funded enterprises. For example, the coalbed methane pipeline from southeast Shanxi to Henan Duanshi is built by a private entrepreneur in Sichuan. Xinjiang Jimu is the Kazang gas field in Kazakhstan, which is operated by a private enterprise. The private enterprise Xinao Gas is building an LNG receiving station in Zhoushan. The branch network of each province and city has both state-owned enterprises owned by local governments, private enterprises, and mixed-ownership enterprises. In the city gas industry, private enterprises and foreign-funded enterprises also play an important role. China's five city-owned gas companies operate the most, including CNPC's Kunlun Gas (state-owned), Hong Kong's Hong Kong (foreign capital), China Resources (Hong Kong Chinese-funded enterprise), private Xinao Gas, and China Gas, all of which operate. Gas business in about 100 cities. There are also many cities where gas is operated by a city gas company owned by the local government. For example, Beijing Gas, the annual consumption of natural gas in Beijing has exceeded 16 billion cubic meters per year, even surpassing the gas consumption of New York City, becoming the second largest gas city in the world after Moscow. And. After Russia's eastern natural gas pipeline is put into operation next year, China's natural gas pipeline network will be further expanded to the northeast of 100 million people, connecting the pipeline network inside and outside the customs. Chinese companies are also actively investing in natural gas exploration and development. It has one-eighth of the shares on Australia's northwestern continental shelf; China's investment in the right bank of the Turkmenistan River and the Yamal gas field in Russia, China has become one of the most active countries in the world's natural gas sector.

Fourth, increase the proportion of natural gas in the energy structure is the need to control air pollution

As everyone knows, in China, many cities, including Beijing, have suffered from fog and the government is making up their minds to govern. Causes of smog Although there is still much debate, the coal industry has different voices, but the proportion of China's coal in energy is too high. The proportion of coal in China's energy is still as high as 65%. In the field of power generation, 72% of power generation is generated by coal. In 2013, the country's highest coal output, output reached 3.8 billion tons, almost half of the world's coal consumption. Therefore, to control smog, replacing coal-fired units with gas units in large cities is an inevitable choice. The original four coal-fired power plants in the urban area of ​​Beijing, when I was in office, insisted on the cogeneration of gas-to-gas conversion to gas, and encountered great resistance. As the smog became more and more serious, Beijing finally made up its mind to shut down all coal-fired generating units in the urban area and replaced them with advanced gas-fired cogeneration units. However, there are still some inconsistencies in understanding, and some scholars believe that the gas generating units Nitrogen oxides still form haze. But I think that whether it is London or Los Angeles, the governance of smog has gone the way to replace coal. Natural gas is a clean energy than coal is an indisputable fact that most people can accept.

5. Price is the biggest constraint to expanding natural gas use

A major constraint to the use of gas in China is the price. The price of natural gas in China is still higher than that of coal. Many experts have called for consideration of pollution costs, the implementation of charcoal transactions, and increased collection of sewage charges. Under the constraints of various interest groups and various opinions, there is a great resistance to implementation. But I believe that the cleansing of energy is an inevitable trend in history, and any interest group must understand this. China is currently undergoing natural gas price reforms, but how to make natural gas competitive is still a difficult point. There is considerable strong opinion that China's coal-based energy structure is difficult to change, while natural gas resources are insufficient. In fact, as far as the world is concerned, natural gas resources are abundant now, and China has great potential. For example, China's CBM has potential, and the scale of development is still small, but the shale gas with growth momentum should not be the main constraint.

Regarding the pricing of natural gas, the S-curve model proposed by Japan has been used for a long time in Asia. The price of natural gas in Asia has been higher than that of other international markets. With the changes in the international market for natural gas, the supply of resources is sufficient, and the market growth has slowed down, there has been a call for the decoupling of natural gas prices from oil prices. This year's LNG spot market price is often lower than the long association price, reflecting the natural supply of natural gas in the international market, from the seller's market to the buyer's market.

6. The pattern of world energy is changing.

The energy issue is closely related to the international political economy. I once described the complexity of international energy people cooperation by political and economic intertwining. In the energy sector, the shale revolution in the United States has had a huge impact, and the United States has become a natural gas exporter from import dependence. Imports from Canada are reduced and can be exported to Mexico, and also seek to export to Asia and Europe. The Middle East countries must reconsider their export markets and so on, which will inevitably affect the pattern of international politics and the orientation of US foreign policy. The pattern of world energy is being reshaped. The most important feature is that due to the slowdown in economic growth and weak energy demand, global natural gas consumption increased by only 1.5% in 2016, 0.8% lower than the growth of 2.3% in 2015, which may be the lowest in history. Year of growth. At present, the price of oil is around US$50/barrel, and the spot price of LNG is roughly US$7/mmbtu. Although the United States has withdrawn from the Paris Climate Convention, the global focus on climate warming, the general trend of reducing greenhouse gas emissions has not changed, renewable energy and clean energy have received unprecedented attention, maintaining rapid growth, and the rising trend of clean energy has not changed. The option to replace coal with natural gas has not changed, as has the United States.

7. China is becoming the most active country in the global natural gas market.

China has rapidly grown into a major producer and consumer of natural gas, and its market space is large and its potential is far from being realized. In fact, the price elasticity of urban gas is also very large. For example, per capita income is far less than that of Beijing and Shanghai's Yichun natural gas price of 4.70 yuan, while Beijing is only 2.27 yuan. Natural gas is still dominated by residents in China, but the demand for distributed energy and transportation energy is also growing. China needs to learn from all countries and cooperate with countries. China is striving to become the rotating presidency of the International Gas Alliance and is actively striving to host the 2024 World Natural Gas Conference. China is becoming the most active country in the global natural gas market.