中国天然气工业存在的问题及对策

Petroleum ScienceoL.2 No. 3Problems and Strategies of Chinas Natural Gas IndustryLiu Chunxu and li Hongxun(College of Economic Administration, China University of Petroleum,Dongying, Shandong 257061, China)Received April 5, 2005Abstract: Although significant progress in Chinas natural gas industry has been made since the adoption of the "EighthFive-Year Plan"(from 1991 to 1995), some problems still exist in the aspects of gas resources, exploitation, utilizationand macromanagement, and hinder a further development of the natural gas industry. A series of strategies for solving theproblems was put forward, including accurate orientation of the natural gas industry, strengthening the construction of gastransmission and distribution networks, comprehensive exploitation policies for"integration of up-and-downstream",government-supported gas-preferential policies, construction of the gas market frameworks and devoting strong effort toe new market development.Key words: China, natural gas industry, problem, development, strategyAccording to the current evaluation, 80 percent of1. Introductionthe total natural gas reserves are distributed in SichuanGreat progress in China's natural gas industry has Ordos, Xinjiang, Qinghai and other midwest regions asbeen made since 1990.The proved natural gas reserves well as offshore areas. In addition, 2/3 of thehave increased substantially each year, from 1,000 recoverable reserves have been discovered in thesebillion cubic meters in 1990 to 2,600 billion cubic areas(Cheng, et aL., 2001). On the other hand, most ofmeters in 2000. During this period, the natural gas the developed cities are located in east and southeastproduction has increased by about ten percent annually,China. They are suffering from an energy shortage andfrom 15.2 billion to 27.73 billion cubic metersthe environmental pollution, so clean energy like naturalHowever,compared with that of the developed gas is in great demand there. The natural gas fromcountries, Chinas natural gas industoffshore areas cannot meet their need for clean energyemainsThus, the inconsistency between the resourcebackward in such aspects as prospecting, exploitation, distribution and market demand distribution is obviousutilization and macromanagement. Through an analysisof the unfavorable factors inhibiting the development ofPoor geographical condition and hostile environmentin natural gas abundant areathe natural gas industry, this paper will discuss theMost of the natural gas reserves have beenstrategy for a further development of the natural gas discovered in poor geographical areas, 84 percent ofindustryPlateau(12%)and offshore(21%)areas. Moreover, the2. Problems with China's natural gas industry gas reservoir beds have some unfavorable2. 1 Profiles of Chinas natural gas industrycharacteristics like deep burial depth and poorAbundance of natural gas reserves and low degree of petrophysical properties. About 32.5 percent of theits explorationresources are buried 3, 500-4, 500 meters deep and 24.8According to the statistics from the "Second Nationapercent are found more than 4,500 meters undergroundOil/gas Resource Evaluation", the total natural gas Deep-layered gas resources are found mainly in Tarim,resources amount to 3. 804 billion cubic metersJunggar, Sichuan and Erdos basins. More than 50Mainland and offshore areas hold 2,990 billion and 814 percent of them are deep-buried, low-permeable andultrabillion respectively (Zeng, et al, 1999), while theeable resonrces ( zeng, et al.,1999),thuscumulative proved reserves are only 6% of the total oring中国煤化工 s to the natural garesources, which is much lower than the world averageCNMH Gt of gas production(42.6%)2.2 Status of the natural gas exploitation andThe regional distribution of natural gas does notmatch the market demand distributionutilization in ChinaVoL 2 No. 3Problems and Strategies for Chinas Natural Gas IndustryLarge reserve-to-production ratio due to low gas energy consumption(Zeng, et al., 1999). For theAlthough the proved natural gas reserves have by power plants, by industry, as chemical raw materials,increased significantly since the Eighth Five- Year Plan for cities and commerce are 13%, 34%, 4% and 39%(from 1991 to 1995), the increase of the natural gas respectively in North America. Gas consumptionoutput remains slow, partially due to limitations in accounts for 27. 2% in energy consumption structure. Instorage and transportation facilities and downstream Western Europe, the numbers are 17%, 24%, 4% andmarketing. Currently, the annual natural gas output is 45% respectively. Gas consumption is 19.2% of theonly about 27 billion cubic meters, namely 20 cubic whole energy consumption structure(Li, et al, 2001)meters per person. There is a big gap compared with the Apparently, compared with the worldwide consumptiondeveloped countries. For example, the annual natural mixes, the share of natural gas used as chemical rawgas output in England is 1, 300 cubic meters per person. materials is relatively huge and unreasonable. TheMeanwhile, residual recoverable reserves of natural gas structure of gas consumption needs to be optimized soof about 1,000 billion cubic meters have not been as to increase the ratio of natural gas consumption in theexploited. The reserve-to-production ratio is higher than energy consumption structure70: 1(Li, et al, 2001). Therefore, the potential of natural Gas storage and transmission equipment not wellgas resources, especially proved reserves, is still great. constructedLack of a full understanding of natural g ts havAffected by the wrong thought that oil is superior toSome relevant officials and urban residents have not natural gas and due to the insufficient investment inalized the important role of natural gas in improving Chinas infrastructure, natural gas storage andtheir living conditions and in sustainable development. transmission equipment has not been well constructedThey prefer to choose coal as the main energy source Up to now, only 17 thousand kilometers of gas pipelinesbecause it is less expensive and more available in China. have been set up, most of which are regional, such asLess attention is paid to the environmental pollution from Lunnan( Xinjiang) to Shanghai; from Jingbiancaused by burning coal. With a rapid economic Shaanxi)to Beijing: from Jingbian( Shaanxi) to Xi'andevelopment and an increasing demand for energy from Jingbian( Shaanxi) to Yinchuan; from NanBaXiansupply, an excessive increase in the consumption of coal(Qinghai) to Dunhuang( Gansu); from Pinghu gas fieldwill cause serious problems for China's future economy. in east China Sea to Shanghai, and fromOn the other hand, due to a lack of communication, the Nanhaiyal2321 to Hongkong. All these gas pipelinesgas consumption index, assigned by National run from an individual gas field to specific end users,Development and Reform Commission, was except in Sichuan and Chongqing regions wheremisunderstood in some cities, which hindered the pipelines are connected with gas supply network(Zeng,atural gas market development. For Jingbian-Xi'an et al., 1999). Meanwhile, no storage equipment hastransmission pipelines in Shaanxi Province, the gas been built for a peak shaving purpose to date. Althoughconsumption indices assigned to Xi'an, Xianyang, this issue has to be taken into consideration by theTongchuan and Yan'an are regarded as constant central government and the project"transmission ofmounts. The utilization of natural gas was confined in natural gas from the west to the east"has started, it isthese limits. For instance, the proposed gas not easy to achieve satisfactory economic benefitsconsumption index for Xianyang 0.15 billion cubic without proper gas pipeline networks linking Chinesemeters. The share of the IRICO color picture tube plant citiesalone is about 0. 1 billion cubic meters in its fully loadedrunning, and the remaining 0.05 billion cubic meters 2.3 Status of China's natural gas macromanagementcan be used by urban residents. Therefore, the local Relevant policies not favorable to the developmentmunicipal planning commission thought it unnecessary of natural gas industryto enlarge the gas consumption market. Some otherIn China, the natural gas industry is still in itscities like Tongchuan have similar ideas about this infancy, so it needs strong support from the governmentHow中国煤化工 cation that theUnreasonable gas consumption mixCNMHas importantIn China's gas consumption mix, 15%of gas is used as it shoululJitvaut ilgioiau ve laws or policiesby power plants, 16.8% by industry, 50.8% as chemical have been established and no natural gas preferentialraw materials, and 17.4% for cities and commercial policies made for the development of natural gaspurposes. Gas consumption holds only 2.1% in primary industryPetroleum Science2005Problems with the management system of natural work plan. The products are sold to the local gasgas projectscompany and then to the consumers. In this way, theIn the management system of natural gas projects, upstream producer is separated from direct contact withgas field exploitation and pipeline construction are their downstream users. On the other hand, due to a lacksubjected to the management of industrial construction of professional administrative organizations and ofprojects, which need the approval from the central powerful coordination organizations, the natural gasgovernment. Projects of this kind are designed and marketing development is suffering from a lack offulfilled as capital construction, while the gas utilization comprehensive consideration in the aspects of generalprojects for downstream cities are subjected to the planning, developtstrategy, Investmentmanagement of the local government and carried out in marketing development, etc. So many different kinds oflight of the general city planning. Therefore, there are selling companies and complex selling pathwayssome conflicts to certain degree. Meanwhile, China's brought big problems to both the gas proThree Oil Giants need to strengthen and improve their users, both in gas production andmanagement of natural gas projects. At present, their of their contractsfunctional departments do not cooperate well in dealingwith the natural gas affairs3. Strategic proposals to speed up theThe unreasonable price of natural gasdevelopment of China's natural gas industryIn recent years, different voices have been heard onthe price of natural gas. Producers thought the price was 3.1 Accurate orientation of the natural gas industrymuch too low while the consumer complained the priceThe increasing important role of natural gas in thewas too high. Both sides seem right. At present, four environmental protection, optimization of the energy-principal parts are related to the production and mix structure and in the sustainable development shouldconsumption of natural gas include oilgas fields be clearly acknowledged. Furthermore, the rapid growthcompanies, gas transmission companies, local gas of the natural gas market is a worldwide trendmarketing development companies and consumers. Preexisting and emerging problems in natural gasEconomic profits for the first three parts are obtained industry should be fully investigated and solvedfrom the last. The consumer or end user is the only Natural gas industry is crucial to the entire nationalfinal stage of the natural gas market. In addition, both economy and should be taken into consideration on thethe production and sale of natural gas are monopolized part of the central government. In view of this, weby government-owned enterprises. "Individual cost plus suggest that the National Development and Reforminterest"protocol is used to make the price of natural Commission should organize and coordinate petroleum,gas, which gives rise to some extra burden on the petrochemical, power, construction, metallurgy, foreigconsumers, so this practice is harmful to the consumer's trade and finance, etc. state-owned big companies andbenefits. This method is contrary to the normal price- departments work together for a comprehensivemaking mechanism and harmful to the progress of development program to strengthen the support in thetechnology and will damage the company's profits as a aspect of policies, tax and capitals and exploitation andresult. A highly efficient administration and control pipeline construction. At the same time, we shouldsystem fit for the economic market demands needs to be execute a mandatory environmental protection policy,further strengthened. On the one hand, the push on the utilization of natural gas to replace the coaladministrative management of China's natural gas was or oil and actively carry forward the use of compressedreformed from a planned economy. Although significant natural gas-burning vehicles and industrial boilers, so asprogress has been made, it still cannot meet the need for to develop the gas market and speed upthe development of a market economy. Due to a lack of development of gas industrythe corresponding running systems, the related up-and-downstream participants were connected together by 3. 2 Strengthening the construction of gas transmissiongovernment administration. There are no common and distribution pipeline networksbenefits and thus no cooperation In selling the naturalgas, protocols from the planned economy were adopted mH中国煤化工 mainly distributed in thearket is located mainly into distribute the resources, with its production plannedCNMHGhus, to develop the gasand the price set by the National Development and industry, a well-organized network, which consists ofReform Commission. Oil gas fields companies are main pipelines, branch pipelines and localresponsible only for their production according to the transmission and distribution network, must be setVol 2 No. 3Problems and Strategies for China's Natural Gas IndustryCurrently, the construction of a gas transmission and 3. 4 Enforcement of gas-preferential policiesdistribution pipeline network falls behind theIn the early stage of the gas industry development,development of the gas industry. It is of great Russia, England and South Korea all adopted"gas-significance to strengthen the construction of gas preferential "policies in the aspect of investment anddistribution networks. Not only the main gas pipelines, price regulations, to boost the development of industrybut also the branch gas pipelines and city distribution Presently, the gas price is at a relative low level ingas networks should be included in the State basic China and less likely to rise again in the near futureconstruction plan. Investment in gas transmission and Government departments should change their financialdistribution networks should be further increased. and tax policies according to the actual situation andFurthermore, preferential policies and regulations on reduce taxes on gas industry. Meanwhile, governmentnatural gas should be made so as to introduce and should reform its fiscal and tax regulations. Flexiblencourage foreign and nongovernmental capitals intogulations should be carried out in different districtsthe gas network constructionand projects. The Sichuan Basin, which contains thelargest gas field in China, is facing the increasing3.3 Improvement of the comprehensive developmedifficulty as the exploitation is extended to its peripheralpolicy for the up-and-downstream integrationand deep areas. An obviously further development ofThe upstream, midstream and downstream sections the gas industry in this district needs new prospectingof the gas industry are tightly connected. Malfunction of and exploitation technologies. A financial investment,any the three will affect the entire development. The worth more than 500 million(RMB)including a largediscovery of additional natural gas reserves is relatively portion of foreign exchange, is expected for modernfast. As it usually takes more than 5 years to go for technology and equipments. Sichuan Petroleumresources from discovery to exploitation, their Administrative Bureau cannot afford such a big fundutilization even needs more time as far as some factors (Zeng, et al, 1999). Financial support fromlike the distance between the reservoir and the end user government through domestic or international mid-orand lag downstream pipeline network infrastructure are long-term loans is greatly needed. Natural gasconcerned. As a result, the reserve-to-production ratio prospecting and exploitation projects also meet someincreased rapidly, whereas the production increasedproblems in areas where gas is buried over 3500 meterslowly. The situation of underdeveloped marketing will deep, making up 57.3% of the total natural gasin turn impede the development of the upstream and resources, as well as in areas with unfavorable naturalhave the proved reserves overstocked. Therefore, it isenvironments such as the Loess plateau, mountainvery clear that consumers and marketing are a key to the desert and offshore areas, constituting 84% of the gasexploitation and utilization of natural gas. Once the resources( Kong, et al., 1998). To encourage the gasproved reserves are given, how and where the market is, Prospecting and exploitation, the central governmentwhen and to what degree the market is developed willshould make gas preferential policies, like"oil and gasbecome the main point of natural gas utilization. Atin parallel with emphasis on natural gaspresent,natural gas industry should be further 3. 5 Setting up a natural gas market frameworkdeveloped in west China's natural gas-producing areasFirst, all production factors including funding, labor,In addition, a prosperous gas market can be also technology, information and natural gas resourcesdeveloped in the east and southeast coastal areas, wherelould be commercialized and go into the market, as isthe economy is well developed. As the gas pipelines are a prerequisite for running the gas market. Second, alinked together, coordinated management needs tight resource optimization system should be set up. Naturalcooperation among all related producing, transmission gas and some other production factors should be noand selling departments. In order to accelerate gas longer under the full control of the government planprospecting, exploitation and utilization and avoid and the allocation of resources should go into theunnecessary resource waste and capital overstocking, market.terprises should be responsible forthe characteristics of natural gas industry must be their中国煤化工 participating in theunderstood. a practical and united program and marketarrangement should be carried out from the selection of manageCNMHreform themselvesthe prospecting area, production capability and into real companies and make their actions meet thecollecting and transmission network to the downstream business standards, thereby enabled to obtain the fuliycomprehensive utilization.right of decision-making in their production process,Petroleum Science2005nd act in the patterns like fair play, self management conditioner market accounts for 12 percent of the worldand responsibility for profits or losses. Fourth, a natural total. Total sales of domestic air conditioner productsgas marketing system should be set up and perfected are about 130 billion(RMB), and that of central airgradually. The efficiency of running the market should conditioner products nearly #10 billion( RMB)in 1998be maintained at a high level and the cost of trading The average annual increasing rate is 20 percent in thereduced. Meanwhile, positive relationships with other90s, much higher than the growth rate of the nationalrelated energy product markets also need to be managed. economy of China. In the aspect of energy consumption,Fifth, laws and regulations to ensure the natural gas domestic air conditioners use electricity, seventymarket running in order and to regulate the market percent of central air conditioners use electricity, whilebehaviors need to be established. As the development of 30 percent of them use natural gas or steam(Nooij],etthe gas market possibly transfers from a short-term al., 2003). Compared with electrical'air conditioners,perfect monopoly market"to an imperfect gas-fired air conditioners have such adcompetition market"and then to a"perfect competitioncapable of shaving the summer electricity peak, usingthe summer gas surplus, protecting our environment andmarket", the situation of monopoly by a few enterprises avoiding damaging the ozonosphere and reducing thewill disappear gradually(gordon, et al., 2003). Lawsrunning costs. In Japan, the advantage of gas-fireand regulations, including"regulations of marketconditioners was well recognized at their early stageadmittance","regulations of market competition"and Efforts were made by the government and the public to"regulations of trade", are needed to ensure fare play develop gas-fired air conditioners. In about ten years, 85ind legal trading among gas enterprises In accordance percent of the central air conditioner markets werewith the natural gas industry development status and the occupied by gas-fired air conditioners. Research andeconomic development level of different districts, we manufacturing of small gas-fired air conditioners(370-suggest setting up five trade centers respectively740 W) for domestic use are in progress. Based on theXi'an, Chengdu, Wuhan, Shanghai and Beijing. The Japanese experience, South Korea begins to develop itsgas-fired air conditioner. The share of its gas-fired airpetroleum gas and electricity, etc can be included in the conditioners holds even a higher percentage in itssame trade center. In such a way, the resources can be national air condition market. China also should adoptoptimized and the cost of trade reduced. Ways of trade their experience to boost the gas-fired air conditionercan be flexible. Spot transaction, futures trading, short- market (Li, et al., 2001), and increase the share ofterm contracts, long-term contracts and so on can be gas-fired air conditioners. This will be beneficial to theadopted. Considering the characteristics of natural gas, development of the national economy and to thea long-term contract is more suitable to stable and safeenvironmental protection. In addition, this will bgas supply. New "laws of contract"have further helpful to boosting the natural gas marketclarified the regulation on electricity, water, gas andheat contracts. Thus, we suggest that the departmentsReferencesconcerned make detailed rules to fulfill the new law and Cheng, G(2001)The Chinese Petroleum Industry: Achievementsegulate both the dealer and the vendor's behaviorsduring 1996-2000 and Targets for the Next Five Years,Rules like"Failure to provide results in punishmentnternational Petroleum Economics, 9(1), 7-8(in Chineseand"fixed price contracts"adopted in the internationalGordon, D. V; Gunsch, K. and Pawluk C. V(2003)A Naturalnatural gas trade need to be standardized as law orMonopoly in Natural Gas Transmission, Energy Economics,regulations, to protect the right and profits for venders25(5),478-479and buyersKong, Z, P. and Wu, Z, Q (1998)Present Situation and FutureTrend of the Exploration and Development of Nature Gas in3. 6 Great efforts to be devoted to the development ofChina, Natural Gas industry, 18(2), 1-3(in Chinese)Li, H. X.(2001)Experiences in Cultivating Natural Gas Marketnew gas marketAbroad and Their Inspiration to China, Natural Gas Industry,Use of natural gas as energy sources for gas-burning21(4),103-105( (in Chinese)power generators, vehicles and air conditioners can be Nooij, Michiel de; Kruk, Rene Van der and Soest, Daan P. vanan important measure. Many reports deal with the use of中国煤化工 ons of Domestic Energynatural gas on power generators and vehicles. Here we25(4),359-361would like to talk about gas-fired air conditioners. Air ZeCN MHGProspect of the Explorationconditioning is an important energy-consuming sectorand Development of Nature Gas in China, Natural GasNow China is the third largest air conditioner market,Industry, 19(4), 88-89(in Chinese)next only to the U.S and Japan. China's share in the air(To be continued on page 992Petroleum Sciencebasis, countermeasures should be put forward in time. equipment and materials, such as automobiles,For an economical and rational use of oil and gas conditioners, refrigerators, fans and building materials,resources, some effective economic leverage or market so that they all have energy saving characters. Thesemechanism should be introduced, technological means kinds of technologies for saving energy should betaken and scientific management conduted to control applied to every link of production process and to everythe oil and gas consumption. Every industry and every aspect of daily lifesector of the society should lay down concrete goals andmeasures for oil and gas saving. Energy development, Referencesshould be takeJiang, Xiaojuan(2004) Chinese Economy Steps into a New Stageimportant item in the mid-term and long-term plan for theThe Challenge and Strategy. Economy Research Journal, 39national economic and social development. Effectiv(10), 4-13 (in Chinesemeasures should be taken for quickly establishing a newmode of production and consumption of oil and a new About the first authoreconomic structure with energy-saving characteristics, andWang Baoyi, born in 1976for energy-saving constructionreceived his Bs degree inWe should accelerate the building of a newpetroleum engineering from Chinaproduction mode beneficial to saving petroleum andUniversity of Petroleum (Eastnatural gas. In the following 10 years, we should takeChina)in 1998. Now, he is studyingmeasures to cut down the oil and gas resourcesfor an academic degree of doctor inconsumption and waste in the process of the oil and gasproduction in the petroleum companiesmanagement engineering in ChinaUniversity of Petroleum (Beijing).Furthermore,weshouldacceleratethesettingupofaE-mail:baoyiwang2003@163.comnew consumption mode beneficial to saving oil and gas.For instance, we should develop new types of electricalEdited by Sun Yanhua)(Continued from page 84)About the first authorLiu Chunxu, bom in 1964, isassociate professor in theDepartment of Economics andManagement of the ChinaUniversity of Petroleum (EastChina). Now as a postgraduate hestudies in the University ofInternationalBusinessEconomics. His research is focusedmainly on oil economics and venture capital. E-mailchunxuliu@sina.com(Edited by Zhu Xiuqin)中国煤化工CNMHG