(Repeats item from March 3)
* Extra heating needs would up gas demand by 1/4 -WoodMac
* Added supply alone more than France consumes in year
* At least 1.2 mln households to switch off coal systems
* Massive extension of gas pipeline, storage needed
* Anti-smog drive to create major infrastructure headache
By Meng Meng and Josephine Mason
BEIJING, March 3 China has set itself a
staggering task to cure its smothering pollution: switching
coal-fired boilers and heating systems in at least 1.2 million
households in 28 of its smoggiest northern cities to run on gas
or electricity. By October.
Beijing's latest crackdown on pollution, outlined in a
policy document dated Feb. 17 and seen by Reuters this week,
dangles a potentially game-changing carrot for the country's
saturated global natural gas market.
The projected extra needs would inflate China's gas demand
by a quarter, according to consultancy Wood Mackenzie - some 50
billion cubic metres (bcm), more than the whole of France
consumes in a year. That would offer the prospect of boosting
prices in a seller's market and surging liquefied natural gas
There's a large, expensive catch. Such expansion is all but
impossible without investing in doubling underground storage
capacity, building thousands of miles of pipeline to carry the
gas in the west to the eastern cities, and installing pump
stations in rural villages - all of which is supposed to be
complete within a meagre seven months.
"The magnitude of this policy is unprecedented," said Guo
Zihua, head of a rural development department at Beijing city
hall that deals with villages surrounding the capital - now on
the front line of the battle for cleaner air.
"The central government has given us very little time to
remove coal heating in rural villages. We are under tremendous
pressure to reach the target," said Guo, speaking during a tour
on Thursday of Beijing's outskirts designed to highlight the
scale of the task.
The radical plan comes as Beijing ramps up its years-long
war on pollution by attempting to wean the nation off coal, its
favourite fuel but one that chokes the north during China's cold
winter months. Most power plants run on coal.
The speed at which the project turned from a draft, issued
in January, into an order suggests the government is determined
to tackle the problem - at any cost. The issue of pollution has
become a political hot potato that will be a major topic during
China's annual parliament meeting, which started on Sunday.
If Beijing official Guo's calculations are anything to go
by, that cost will be enormous: by October, the capital must
convert boilers serving around 300,000 residents to run on gas
or electricity rather than coal, and is ploughing 10 billion
yuan ($1.45 billion) into funding the switch.
And for provinces that aren't as advanced as the capital,
the challenge will be much more difficult and costly, said an
official at the city's coal department on Thursday.
As well as a matter of improving national health, curbing
pollution is a key part of a strategy of upgrading the economy
by shifting away from heavy industry like public construction
projects and tackling overcapacity.
Yet analysts say the plan's fate will rest on a massive,
breakneck infrastructure build-out including LNG terminals,
storage tanks and pipelines.
"If you look at the pollution in China, it's clearly a
massive problem so it's not a surprise they want to do this,"
said Neil Beveridge, senior oil and gas analyst at Sanford C
Bernstein. "The big question is: how are they going to achieve
Underground storage capacity needs to increase to around 40
bcm, or 20 percent of annual demand, to support the boost in
demand. That'd be up at least more than double an estimated
current capacity 10-20 bcm.
The daunting scale of the plan leaves huge questionmarks
over the prospects of its success. But in the meantime,
construction and energy companies are gearing up for a windfall.
Some, like China National Petroleum Corp (CNPC),
were already at work on extending the country's gas
infrastructure. CNPC is building the fourth Shaanxi-Beijing gas
pipeline, a critical 1,114 kilometre line with 25 bcm capacity
reaching China's northeastern region.
The existing three lines with 35 bcm are already operating
at full capacity. Whether by coincidence or design, the new pipe
is due to come into operation by October this year.
($1 = 6.8989 Chinese yuan)
(Reporting by Meng Meng and Josephine Mason; Editing by Kenneth