Following the National Development and Reform Commission, the Ministry of Ecology and Environment and the Ministry of Commerce have also successively expressed their views on addressing the natural gas supply gap from their respective perspectives. On December 7th, Beijing Business Journal learned from industry sources that the Ministry of Ecology and Environment has issued an urgent notice to the "2+26" cities in the Beijing-Tianjin-Hebei region and surrounding areas, regarding the comprehensive treatment of scattered coal and ensuring the warmth of the people during the winter. The notice explicitly states that unfinished coal-to-gas (or electricity) projects and localities should continue using past coal heating methods or other alternative methods. Meanwhile, at a regular press conference held by the Ministry of Commerce on the same day, spokesperson Fenggang clearly stated that China actively supports enterprises in diversifying their imports of overseas natural gas resources. However, in the industry's view, the slow progress of gas storage facility construction and the entire oil and gas system reform process are the core issues that China needs to face in the natural gas supply process.
Collaborative Supply Assurance
As China's energy structure adjustment continues to advance, the role of natural gas in energy consumption is increasingly strengthened, with its contribution to heating and power supply continuously growing.
However, the document issued by the Ministry of Ecology and Environment also points out that recently, during the verification process, the Ministry has found issues such as tight natural gas supplies during the heating season in some regions. Therefore, the document states that in the promotion of coal-to-gas projects, completed projects and localities must ensure a stable supply of gas and electricity as well as stable prices.
On the same day, Fenggang also clarified his stance on ensuring natural gas supply from the import perspective, stating, "Our country attaches great importance to the guarantee of natural gas supply and actively supports enterprises in diversifying imports of overseas natural gas resources while increasing domestic production." Fenggang noted that with the completion and operation of new cross-border natural gas pipelines, coastal liquefied natural gas receiving stations, and other infrastructure, China's import capacity and level of natural gas is expected to further improve.
On the other hand, the National Development and Reform Commission (NDRC), the department in charge of pricing, has also begun to strictly regulate the prices of natural gas supply. Data shows that the price of liquefied natural gas at the factory has surged significantly in the short term, reaching a historic high of 9,400 yuan/ton on December 1st. According to the National Bureau of Statistics, the market price of this product was only 4,337 yuan/ton as of the end of October. Beijing Business Journal reporters learned from the industry that the NDRC has issued a notice to local NDRCs (Price Bureaus) titled "Notice on Deploying a Reminder and Warning Meeting on Liquefied Natural Gas Price Laws and Regulations," explicitly reminding and warning liquefied natural gas companies and relevant social organizations to:自觉 comply with price laws and regulations, maintain industry price order, not fabricate and disseminate price increase information, not maliciously hoard and drive up prices, not abuse market dominance, and not enter into monopolistic agreements, etc.
Gas Storage Capacity and System Reform
"Alleviating the supply gap at its root, successfully achieving the natural gas supply targets as planned, still requires accelerating the reform of the oil and gas system and improving the market mechanism design for gas storage and other links." An industry expert frankly stated.
In August, the National Energy Administration's Oil and Gas Department, among other departments, released the "China Natural Gas Development Report 2017," stating that compared to developed countries in Europe and the United States, China's construction of natural gas pipelines and underground gas storage facilities lags significantly. As of the end of last year, China's pipeline mileage per 10,000 square kilometers of land area was approximately 70 kilometers, only 12% of the United States'. The underground gas storage facilities had a working gas volume of 6.4 billion cubic meters, accounting for just 3.1% of consumption, far below the global average of 10%. Han Xiaoping, the Chief Information Officer of China Energy Network, further explained that currently, Europe's storage level as a percentage of consumption has reached 15%, while the United States and Russia, as major natural gas producers, have storage volumes of 120 billion and over 70 billion cubic meters, respectively, accounting for 15.4% and 18.8% of consumption. The National Development and Reform Commission had also publicly stated that China's gas storage facilities have shown a slow construction pace and insufficient peak-shaving capacity, urgently needing to encourage investment in building storage facilities to enhance the guarantee of natural gas supply.
Han Xiaoping stated that the production cost of natural gas is higher than that of coal, and the level of pipeline construction for natural gas transportation needs improvement, with a higher waste rate along the route compared to coal transportation. The profitability of natural gas enterprises is not ideal. Whether to continue subsidizing natural gas enterprises and how to balance between the revenue and subsidies of natural gas enterprises are among the reform challenges faced by various regions.
