Chongqing Gas & PetroChina to Jointly Build UGSs in SW-China
Southwest China’s Chongqing Gas recently announced to establish Chongqing Natural Gas Storage and Transportation Co. together with PetroChina and other partners, aiming to build Tongluoxia and Huangcaoxia underground natural gas storage facilities with total reserve capacity at 3.08 bcm and working capacity at 1.58 bcm.
The new JV is established by Chongqing Gas (19% stake) and PetroChina (45%), together with both parties’ strategic partners including Chongqing Shale Gas Investment Foundation (10%), China City Natural Gas Investment Group (10%), Beijing Gas Group (10%) and Chongqing Kaiyuan Oil & Gas (6%). Herein, PetroChina will invest by cash and the two UGS projects in the preparation stage, and the other shareholders will invest in cash. The total investment of the six companies reached 2 billion RMB, and the whole investment of the two UGS is expected to surpass 4.9 billion RMB.
In 2017, PetroChina announced to build two new UGSs in Chongqing Municipality to enhance the natural gas peak-shaving capacity in Southwest China and support the winter supply to the east. According to SCI monitoring, Tongluoxia UGS started the pilot test in September 2018, and Huangcaoxia UGS started the pilot test and environment evaluation in April 2020.
The two projects are considered as a response of Chongqing Gas to NDRC’s natural gas storage capacity mandate regulated in April 2020’s Implementation Opinions on Accelerating the Construction of the Capacity of Natural Gas Reserves, which requested the NOCs to establish a storage capacity of 10% their annual sales respectively, the city gas companies to build up a storage capacity of 5% their annual sales respectively, and the governments at all levels to secure 3-day emergency storage capacity within the jurisdiction. With the two new UGSs commissioning from 2021 to 2025, Chongqing government and Chongqing’s franchised city gas company Chongqing Gas will gradually match the mandate and provide secured peak-shaving capacity to Chongqing, the center of Southwest China region.
It is also worth mentioning that in Chongqing Gas’s announcement, for the first time ever in China, the investment return rate for UGS was revealed. Chongqing Gas expected a 13.71-year static payback time, and the financial internal rate of return (FIRR) is estimated to be 6.03%, which is considered profitable for billion RMB grade infrastructure investment.
