China, foreseeing major potential in natural gas to reduce heavy reliance on coal and oil, plans to build a second pipeline linking gas deposits in the west to the energy-guzzling Guangdong Province in the south.

The new pipeline, still in the preliminary study stage, is expected to connect the gas-rich Xinjiang Uygur Autonomous Region in the west with Guangzhou, capital city of Guangdong Province, a senior official from the Ministry of Land and Resources (MLR), told China Daily yesterday. The line will bypass Zhengzhou, capital of Central China's Henan Province.

"Government bodies and companies, including the National Development and Reform Commission (NDRC), are still in the preliminary study of the project," said the ministry official who did not want to be identified.

PetroChina, following the operational start-up of its first West-East Gas Pipeline at the end of last year, will be the builder of the new pipe, the official said.

The first line has a designed annual capacity to pump 12 billion cubic meters (bcm) of natural gas from the Tarim Basin of Xinjiang Uygur Autonomous Region to the commercial hub Shanghai through a 4,000-kilometer-long pipeline.

An official surnamed Gong from PetroChina's subsidiary for natural gas and pipeline operations yesterday told China Daily, "PetroChina is considering the feasibility of the project."

The new pipe is designed with a bigger investment than the current US$5.2 billion west-east line, the official said.

PetroChina sources said construction of the new pipeline to Guangzhou will start in 2020 and will have a capacity of 26 bcm a year, more than double that of the current line to Shanghai.

Jin Zhengli, a senior engineer at the pipeline engineering department at the PetroChina Planning & Engineering Institute, said PetroChina would use imported natural from neighboring Russia or Kazakhstan to fill the two pipelines. Gas reserves in Xinjiang are not sufficient to meet the surging demand in the energy-hungry Guangdong and Shanghai, he said.

PetroChina has confirmed 658 bcm of proven gas reserves in Xinjiang's Tarim Basin, but finding further reserves seems "not as optimistic" as originally estimated, Jin told China Daily.

"The new pipeline is designed in parallel with the natural gas import schemes from the two neighboring countries," Jin said.

Moscow-based OAO Gazprom, the world's biggest natural gas producer, announced in September it is talking with PetroChina's parent China National Petroleum Corp (CNPC) to export gas to China through a cross-border pipeline.

The possible route may run through Xinjiang Uygur Autonomous Region or Northeast China's Heilongjiang Province, Alexander Medvedev, deputy chief executive officer of Gazprom, said. Each pipe has an annual capacity of as much as 30 bcm a year.

With Kazakhstan, the two countries last week announced the operation of China's first cross-border crude oil pipeline, initially carrying 10 million tons of crude oil from the Central Asian nation to Northwest China's Xinjiang.

Industry analysts said the first oil pipeline would pave the way for further co-operation in pumping gas from Kazakhstan to China.

The new gas pipeline, together with the operational one, could be a strategic long-term energy blueprint to use cleaner natural gas and replace the environment-polluting coal and oil.

The country intends to increase the percentage taken up by gas in the overall energy sources mix to 10 percent by 2010, from the current 3 percent.

PetroChina's Jin said the new pipeline still faces market risks since China will have diversified sources for natural gas supply, like LNG (liquefied natural gas) terminals in the coastal areas in a few years.

China National Offshore Oil Corp has planned four LNG terminals in Shanghai, Zhejiang, Fujian and Guangdong, expected to begin operations in three to five years.

"There will be more competition in the (natural gas) market," said Jin.

China's gas output this year is expected to reach 48 bcm, and the government plans to increase the figure to 80 bcm by 2010 and 120 bcm by 2020.

But even so, the production looks likely to fall short of the expected demand of 120 bcm per year by 2010 and 200 bcm by 2020.

Wu Qingbiao, secretary-general of Guangdong Oil & Gas Association, said the demand for natural gas in the southern province is "enormous," driven by gas power generation and other industrial sectors. "We can almost take as much as they can supply," Wu said.

(China Daily December 21, 2005)