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China Pushes Gas

Incentives abound as country ups the stakes...

China's central government has announced new policies to support China's fledgling natural gas industry and stem pollution, according to China National Offshore Oil Corp president Fu Chengyu.

While China wants to double the contribution of natural gas to its energy mix to 6 per cent by 2010, gas users have little incentive to switch from the cheaper and more popular coal and oil.

According to Fu, "the central government has given some incentives to local governments and corporations, such as an exemption of gas from import tariffs."

Another measure is a direct subsidy on a portion of the difference between the costs of natural gas and coal. The cost will be split between the central government and local governments.

"The actual amount of subsidy will depend on the economic status and energy mix of a region - the poorer and the more coal is used in an area, the more encouragement will be given," Mr Fu said, adding the subsidy split would be negotiated between the central and local governments.

The measures are key to the success of China National's gas import business. The company is building a terminal in Guangdong province to regasify liquefied and chilled natural gas to be imported by tankers from Australia. Another terminal is set to be built in Fujian province and a third in Zhejiang province.

It plans to build more terminals in other coastal cities north of Zhejiang, where it will face competition from PetroChina and China Petroleum & Chemical, which also wants to build liquefied natural gas terminals in east China.