What are the challenges facing china's pipeline network
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China faces significant challenges in expanding its oil and gas pipeline infrastructure to meet increasing energy demands by 2030, including a projected 240% rise in oil consumption and a 250% increase in gas imports. Current projects aim to enhance domestic distribution and reduce reliance on coal, but the industry struggles with inefficiencies, outdated materials, and bureaucratic hurdles. Unless substantial reforms are implemented, China may not achieve its energy and environmental goals within the specified timeframe.
What are the challenges facing china's pipeline network
- 1. 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 15/08/2014Nicholas Newman www.nicnewmanoxford.com
- 2. China’s Oil and Gas Market 2014 15/08/2014Nicholas Newman www.nicnewmanoxford.com 2 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
- 3. What’s Driving Demand for Pipelines 15/08/2014Nicholas Newman www.nicnewmanoxford.com 3 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
- 4. Reasons for Pipeline Construction 15/08/2014Nicholas Newman www.nicnewmanoxford.com 4 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.
- 5. Some Current Pipeline Plans 15/08/2014Nicholas Newman www.nicnewmanoxford.com 5 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
- 6. China’s gas pipelines 15/08/2014Nicholas Newman www.nicnewmanoxford.com 6
- 7. China’s gas network 2014 15/08/2014Nicholas Newman www.nicnewmanoxford.com 7 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
- 8. China’s oil pipelines 15/08/2014Nicholas Newman www.nicnewmanoxford.com 8
- 9. China’s oil network 2014 15/08/2014Nicholas Newman www.nicnewmanoxford.com 9 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
- 10. Problems facing pipeline industry 15/08/2014Nicholas Newman www.nicnewmanoxford.com 10 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
- 11. China’s shale oil/gas basins 15/08/2014Nicholas Newman www.nicnewmanoxford.com 11
- 12. Operational Challenges 15/08/2014Nicholas Newman www.nicnewmanoxford.com 12 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
- 13. China’s major oil fields 15/08/2014Nicholas Newman www.nicnewmanoxford.com 13
- 14. Government action 15/08/2014Nicholas Newman www.nicnewmanoxford.com 14 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
- 15. China’s LNG Plants 2012 15/08/2014Nicholas Newman www.nicnewmanoxford.com 15
- 16. Proposed Solutions 15/08/2014Nicholas Newman www.nicnewmanoxford.com 16 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
- 17. 17 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
- 18. NICHOLAS NEWMAN HTTP://UK.LINKEDIN.COM/PUB/NI CHOLAS-NEWMAN/8/8/63B/ WWW.NICNEWMANOXFORD.COM Nicholas Newman www.nicnewmanoxford.com 15/08/2014 18 Thank you! Any questions?