Guangdong Expands Natural Gas Direct Supply, Ready to Join PipeChina
September 1, 2020, Guangdong Provincial Development and Reform Commission issued the Notice to Expand Direct Supply Coverage of Natural Gas in Guangdong Province so as to further reduce the intermediate links of the natural gas chain and reduce gas transmission and distribution costs. The new method is available to commercial and industrial users with gas annual consumption of more than 10 million cbm close to the main pipelines and qualified for direct supply. Meanwhile, large industrial users, gas power plants, distributed energy projects and refineries with annual natural gas consumption of more than 100 million cbm has already enjoyed the new policy in previous policy adjustments.
More importantly, the main natural gas pipelines in Guangdong province no longer split into the national pipeline system and the provincial pipeline system, meaning that Guangdong is ready to join PipeChina’s midstream storm. Based on the principles of reducing gas supply links and gas transmission costs, city gas companies and direct-supply users can independently negotiate with pipeline operators to select the gas supply method to encourage the multi-source supply. As for areas covered by city gas pipelines, direct-supply users can independently select the direct supply method or the city gas pipeline to supply gas.
As a major role in China’s second-phase coal-to-gas switch, Guangdong implemented aggressive measures to replace the bulk coal burning within its territory, which is mainly concentrated in the ceramics industry. However, ceramics companies complained a lot about the surging cost and fading competition advantage. In the past several months, the negotiation game between industrial users and city gas companies in Guangdong’s Foshan city is a clear signal, revealing the heavy cost pressure in the coal-to-gas switch. The new policy to lower the direct supply limit to 10 mcm per annum is a great step from the policy side to push forward the switch, but conflicts remain in the contradiction of city gas franchise and direct supply mechanisms, while the difficulties in practice also challenge the end-users.
