China Misses Gas Goals

May 25, 2005: A red star fronts a pressure tank at the Yanlian Oil Refinery in Yan'an, north of Xian in western China's Shaanxi province. Photo: AFP/Frederic J. Brown

A top Chinese energy official has warned against relying on natural gas to produce electric power following signs that the government is failing to meet targets for switching to the clean-burning fuel.

Speaking at an industry conference in Beijing Feb. 19, the secretary-general of the China Electricity Council, Wang Yonggan, said many gas-fired power plants were forced to close down last year due to a shortage of supplies.

Even if China really goes for the higher import LNG prices, that could lead to another problem—whether it’s economical for the power plants.

In an interview, Philip Andrews-Speed—a China energy expert at Scotland’s University of Dundee—said the closure of those gas-fired plants is a major setback for the country’s energy goals and the environment.

To meet energy demands, China is now adding 5 percent more per year in coal consumption, Philips-Speed said, adding that this is a “major problem” for the region and the world.

“It’s affecting local pollution in particulates, it’s affecting regional pollution with acid rain, as well as the global warming issue,” he said.

Andrews-Speed said China’s government has discussed new policies to promote gas use for most of the last decade. However, it has failed to set up the regulatory framework for a market that can assure gas supplies to modern power plants when they are built.

It’s affecting local pollution in particulates, it’s affecting regional pollution with acid rain, as well as the global warming issue,

This has discouraged energy producers from shifting from coal to gas, with its higher costs for clean power, he continued.

China also faces problems in its plans for imports of liquefied natural gas, or LNG, which it hoped would supplement domestic supplies.

LNG prices have soared, in part because of expectations of high Chinese demand. As a result, the government has cut back on the number of import projects it has approved to keep from driving prices even higher.

Kang Wu, head of China energy projects at the University of Hawaii’s East-West Center, said that worldwide demand for energy has also pushed prices up since China made its import plans. “The demand for natural gas overall has been high,” Wu said.

“And that’s leading to limited supply of domestic natural gas available to almost all users, including the power sector. In the meantime, international oil and gas prices have soared so much that China couldn’t get imports easily.”

As a sign that “China is not ready,” Wu said talks between the China National Offshore Oil Corporation (CNOOC) and U.S.-based Chevron collapsed in October 2005 after two years of negotiations over supplies from Australia’s giant Gorgon gas field.

At a time when China is trying to keep down the price of electricity, Wu said, domestic and foreign energy costs have combined to discourage the use of gas.

“Even if China really goes for the higher import LNG prices, that could lead to another problem—whether it’s economical for the power plants.”

Original reporting by Michael Lelyveld. Edited for the Web by Richard Finney.