1. 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
Are China’s Pipelines Ready: to meet its energy needs by 2030?
Nicholas Newman
15/08/2014

2. China’s Oil and Gas Market 2014
2013
2030 Forecasts
Oil Consumption
10.7 million bbl./d
240% increase
Oil Imports
4.5 million bbl./d
Oil Production
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
15/08/2014

3. What’s Driving Demand for Pipelines
7.5% economic growth per year
China 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 sector
Many pipelines over 40+years old and often built with poor quality materials
Sources: EIA, Peoples Daily, IEA, Gazprom, Sinopec, Holmwood Consulting Ltd
Nicholas Newman
15/08/2014

4. Reasons for Pipeline Construction
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 market
build the associated gas pipelines at planned LNG import terminals.
Sources: BP, China Daily, xinhuanet.com
Nicholas Newman
15/08/2014

5. Some Current Pipeline Plans
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
Front End Engineering Design stage
1.6 Tcf/y
Unknown
East West gas pipeline 5
East Siberian gas pipeline
CNPC/
Gazprom
Proposed
1.3 Tcf/y
Taiwan Straits gas pipeline
CNPC/CPC Corp.
Source: Various sources
Nicholas Newman
15/08/2014

6. China’s gas pipelines 15/08/2014
Nicholas Newman
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7. China’s gas pipeline network 2014
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
15/08/2014

8. China’s oil pipelines 15/08/2014
Nicholas Newman
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9. China’s oil network 2014 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
15/08/2014

10. Problems facing pipeline industry
Slow pace of market reform
Inefficient state owned companies and government agencies
The 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
15/08/2014

11. China’s shale oil/gas basins
Nicholas Newman
15/08/2014

12. Operational Challenges
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
Sources: EIA, China Daily, Holmwood Consulting Ltd
Nicholas Newman
15/08/2014

13. China’s major oil fields
Nicholas Newman
15/08/2014

14. Government action
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
15/08/2014

15. China’s LNG Plants 2012
Nicholas Newman
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16. Proposed Solutions 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
Nicholas Newman
15/08/2014

17. 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
Conclusion
Nicholas Newman
15/08/2014

18. Thank you! Any questions?
Nicholas Newman
Nicholas Newman
15/08/2014