On July 4, the NDRC (National Development and Reform Commission) of China issued the Opinions on Accelerating the Utilization of Natural Gas (hereinafter referred to as “the Opinion”). The NDRC has issued the Opinions on Accelerating the Utilization of Natural Gas (Consultation Draft) (hereinafter referred to as “the Draft”) in January. We can notice the differences between the two documents. SCI holds that there are four aspects that players need topay much attention to:
1. According to the blueprint for China’s energy structure adjustment, the natural gas will take a higher percentage in the structure forprimary energy consumption by 2020. In the Draft, it is stipulated that the percentage for natural gas consumption in the overall structure for primary energy consumption will be 8%–10%. But in the Opinion, it states that the percentage should reach about 10%. That means China’s policy makers have stronger confidence in promoting the utilization of natural gas.
2. The goals for natural gas peak-shaving are more detailed, and players’ responsibilities in the peak-shaving are clearer. As for the naturalgas peak-shaving capacity, the Draft indicates that the available underground gas storage should be 30 billion m3. But in the Opinion, the goal is promoted to 35 billion m3. As for the responsibilities in the construction of peak-shaving facilities, the Opinion makes it clearer. Players in the upstream and midstream of the natural gas industries are responsible for the gas storage which are equal to a month’s consumption volume. The urban gas providers are responsible for the peak-shaving in people’s daily life. By 2020, the natural gas marketing company in the upstream and midstream shall have a gas storage which is equal to over 10% of the annual contract sales volume. The county government shall guarantee a gas storage which can meet the local demand for at least 3 days.
3. The natural gas is promoted to be used in more industrial fields.As a kind of industrial fuel and also a kind of chemical feedstock, natural gas will be used in more industrial fields. The Draft states that natural gas will be an alternative energy source in the glass and ceramics industries in some heavily polluted areas. But in the Opinion, natural gas is promoted to be used in 5 key industries, namely, glass industry, ceramics industry, building materials industry, machinery and electronics, and textile industry. Besides, the policy also intends to give economy incentives to the enterprises which use natural gas in the production.
4. The natural gas consumption in the transportation fields will be enlarged, and the goals are quantified. In the Opinion, the family sedan is eliminated from the transportation media which will be promoted, while the LNG-fueled long distance heavy truck is newly-added. The Draft states that the owners of the LNG-fueled ships or modified LNG-fueled ships will get subsidies.The Opinion indicates that the formal subsidy policy will be implemented before Dec 31, 2017. The Opinion emphasizes that much efforts will be put in promoting the natural gas utilization in the transportation fields.
The policies for accelerating the natural gas utilization are more detailed. The natural gas industry may undergo another period of rapid development. But two reasons may affect the sustaining process:
1. China intends to achieve an urbanization rate of 60% by 2020, the ending year of the 13th Five-Year Plan. The current urbanization rate was 57.35% at the end of 2016. That means there is a small range for the urbanization rate to go higher in China. Thus, the demand from urban-use may increase slightly and limitedly in the coming 2 or 3 years. But as China’s urbanization has a large population base, the demand may still remain high.
2. Although natural gas will be used in more industrial fields, the process of destocking, cutting the excessive industrial capacity, industrial structure adjustment may shrink the margin for the demand increase in the industrial fields. China started this process from the beginning of the 13th Five-Year Plan. It is uncertain for the sustainable development of some industries. As mentioned above, the current relatively high urbanization rate will impact the demand for building materials, such as steel, glass, ceramic, etc. As a result, the development and the adjustment of the capacity and the stock in the ceramic industry, steel and iron industry may curb the demand for the energy resources, such as the natural gas.
SCI holds that China intends to set natural gas as one kind of key energy resources. Policies and documents are put forward gradually, and they are more specific, detailed and pragmatic. It is an essential move for China’s economy upgrading and environmental protection. Chances may emerge in the process, but time will tell whether the goals are only goals or results.
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