On June 11, Zhejiang province held the provincial natural gas system reform conference and the tripartite transaction intent letter signing ceremony for provincial natural gas upstream and downstream direct dealing and gas grid transmission trial.
According to Zhejiang Provincial Development and Reform Commission, 9 enterprises including upstream suppliers, downstream buyers and transmission enterprises signed the tripartite transaction intent letter, marking that Zhejiang province broke the unified purchasing and sales mechanism, and the natural gas reform took a substantial step towards the transformation of the substitute transportation model. According to sources, the intent letter only confirmed the tripartite transaction intention, while it did not confirm the transaction volume, price or transmission fee, etc. As required by the People’s Government of Zhejiang Province, the enterprises that signed the intent letter need to complete the signing of natural gas purchasing and sales contract and transmission agreement by the end of June 2020.
In early April 2020, Zhejiang Provincial Development and Reform Commission issued 2020-2021 Zhejiang Province Piped Gas Upstream and Downstream Direct Dealing and Gas Grid Transmission Pilot Project (Trial). In 2020, the upstream and downstream direct transaction volume of PNG in Zhejiang will be above 3 bcm, and downstream gas enterprises will save costs by more than 300 million RMB.
Up to now, PNG direct dealing volume in Zhejiang province is less than 3 bcm, while the natural gas purchasing and sales prices are predicted to drop to a certain extent. It is reported that Xinchang county of Zhejiang province, as the first trial of PNG upstream and downstream direct dealing, the gas purchasing cost declined by RMB 0.1/cbm. Reducing end enterprises’ cost is an important goal of Zhejiang province to promote the natural gas system reform, PNG upstream and downstream direct dealing and gas grid transmission trial, so Zhejiang Provincial Development and Reform Commission plans to reduce enterprise users’ gas cost by more than 2 billion RMB in 2020.
The upstream suppliers include PetroChina Zhejiang Marketing Co., Ltd., Sinopec Natural Gas Co., Ltd., Sinopec Fuling Shale Gas Marketing Co., Ltd., CNOOC Zhejiang Marketing Co., Ltd., CNOOC (China) Donghai Xihu Oil and Gas Operating Company, Ningbo Chengji Energy Trading Co., Ltd., PetroChina Material Supply Group and Yan’an Dexiang Energy Technology Co., Ltd. The downstream buyers include Jinhua Chinagas City Gas Development Co., Ltd., Yiwu Natural Gas Co., Ltd., Huzhou ENN Gas Co., Ltd., Haining ENN Gas Co., Ltd. and some gas power enterprises in Zhejiang Province.
City gas enterprises with low gas consumption showed higher enthusiasm than those with high gas consumption. It is reported that Shaoxing Natural Gas Investment Co., Ltd. and Hangzhou Gas Group, which are the first and second-largest consumer in Zhejiang province, both signed up for the pilot project, but did not implement the direct dealing intention.
In 2020, China’s natural gas supply is sufficient, and LNG prices are at a low level. Besides, only Zhejiang Energy Natural Gas Piping Network Co., Ltd. transmits PNG as the middle link, marking that Zhejiang province gas grid enters a new stage of large-scale transmission. Except for the upstream and downstream direct dealing, Zhejiang province will also focus on the realization of gas grid transmission and the separation of purchase and sales.
